Anticipating more economic pain up ahead

On June 17, 2026, Presidents Donald Trump of the United States and Masoud Pezeshkian of Iran signed a memorandum of understanding (MOU) laying out the terms for ending the Middle East war and reopening the Strait of Hormuz. This is a welcome development for many countries, including the Philippines, who haven’t been spared of the economic fallout from the war and the closure of the Strait of Hormuz.

However, not long after the MOU was signed, talks between the US and Iran have been postponed and the situation is creating a sense of uncertainty whether this ceasefire will hold. Both sides have 60 days to work out and finalize a peace deal, which could be extended or could just simply fall apart.

For the Philippines, regardless of the outcome of those negotiations, indications suggest that there is very likely more economic pain up ahead. The government must be prepared and fully focused to deal with this problem because even with the best-case scenario of both sides effectively and sustainably ending armed hostilities, our government shouldn’t make the mistake of assuming the shock will be quickly over.

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The damage from this conflict is already flowing through world prices, shipping, and inflation expectations, and those forces tend to move with a lag. The World Bank says the Middle East war is driving a 24-percent jump in energy prices this year, a 31-percent rise in fertilizer prices, and a 16-percent increase in overall commodity prices, with global inflation and growth both taking a hit. Its baseline assumes only that the most acute disruptions end soon and that shipping through the Strait of Hormuz gradually normalizes by late 2026. That means a ceasefire or deal may end up stopping the bleeding, but it does not instantly heal the wound.

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For the Philippines, the danger is not only higher fuel prices at the pump. There is a broader chain reaction: more expensive transport, pricier fertilizer, costlier food, and eventually tighter financial conditions if inflation stays “sticky.” The Bangko Sentral ng Pilipinas has already said that domestic growth has softened amid weak sentiment, that higher oil prices could dampen domestic demand, and that inflation would move further away from target if crude stays elevated. It was also reported that the central bank warned a sharp and prolonged oil shock could trigger spillover effects and broaden price pressures.

That is why the government’s first task is not to celebrate a deal, but to cushion the lagged effects. In the Inquirer’s June 17 editorial, it emphasized that this ceasefire MOU provides a vital window of opportunity opened by a fragile peace deal to bring down oil prices and ease inflationary pressures for the Marcos administration to implement short- and long-term measures to ease the burden on Filipinos.

Indeed, failure to do so is liable to lead to dire consequences. The government will need to reduce the country’s exposure to future pain by implementing policies and measures to increase investments in agriculture, renewable energy, plus easier financing and support for micro, small, and medium scale enterprises, among others. It should reprioritize spending toward food security, public transport relief, and targeted cash aid while protecting capital projects that improve resilience, such as irrigation, ports, storage, and energy diversification. Fiscal policy must also be precise, because careless spending can force tighter rates, slowing recovery just when households and firms are least able to absorb it.

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However, it isn’t only just the administration that has a role to play here. Congress is just as vital to this effort because economic mitigation often depends on fast legislative action: supplemental appropriations, subsidy authorizations, oversight of emergency spending, and reforms that improve food and fuel resilience.

The recent chaotic situation in the Philippine Senate only further complicated efforts to address the problems. The standoff had paralyzed the chamber, delayed urgent legislative duties, and sent a negative signal to investors. Furthermore, a Senate consumed by internal conflict can delay all of those efforts, and delay is costly when inflation is still working through the system. Thankfully, it appears that the Senate leadership issue has been resolved with the election of Sen. Sherwin Gatchalian as Senate president.

With that, we hope that our branches of government can now fully focus and work closely together on the vital and urgent tasks up ahead, because the real test for our country is not whether the conflict abroad ends, but whether it can keep policy coherent at home. If the government wants to blunt the next wave of economic pain, it needs stable institutions, quick legislative action, disciplined spending, and institutions that treat the conflict’s aftershocks not as some distant headline, but as a domestic emergency requiring a coherent, focused, and coordinated response.

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Moira G. Gallaga served three Philippine presidents as presidential protocol officer and was posted at the Philippine Consulate General in Los Angeles and the Philippine Embassy in Washington.

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