On February 28, 2026, the United States and Israel launched coordinated airstrikes on Iranian military and nuclear facilities. Within hours, global oil markets reacted. Within days, Filipino households were already feeling it — at gas stations, in cargo surcharges, and in the prices of basic goods at the market.
This is not coincidence. It is how the global economy works, and the Philippines sits at one of the most vulnerable points in that chain.
The Strait of Hormuz: The Bottleneck That Rules Our Prices
The Strait of Hormuz is a narrow waterway between Iran and Oman — barely 21 miles wide at its tightest point. Through it passes roughly one-fifth of the world's entire oil supply: about 20 to 21 million barrels per day. When conflict threatens that passage, oil markets price in the fear immediately, even before a single tanker is actually blocked.
For the Philippines, this matters more than for most countries. We import more than 90 percent of our crude oil, and nearly 90 percent of that comes from the Middle East. There is no domestic oil alternative to fall back on. When global oil prices rise, our pump prices rise almost in lock-step — faster and with less cushion than countries like Indonesia or Malaysia, which use government fuel subsidies to absorb shocks.
Dutch financial giant ING Group identified the Philippines as one of the worst impacted economies in Asia specifically because our retail fuel prices are market-driven with minimal subsidies. When crude spikes, Filipinos pay the full transmission almost immediately.
What Has Actually Happened to Fuel Prices
Since the conflict began, local oil companies have implemented some of the steepest fuel price hikes in recent years — often in multiple tranches within a single week:
- Diesel has risen between ₱17.50 and ₱24.25 per liter in the first two weeks alone. At Shell stations in some areas, diesel now retails between ₱75 and ₱85 per liter.
- Gasoline (RON91) has climbed between ₱7 and ₱13 per liter, with further hikes of ₱14 to ₱17 expected in the week of March 16.
- Kerosene — widely used for cooking and heating in lower-income households — has surged by ₱32 to ₱38.50 per liter, the sharpest increase of all fuel types.
The Department of Economy, Planning and Development (DEPDev) has presented two scenarios to Congress. Under the moderate scenario (crude averaging $100/barrel through May), diesel could reach ₱96 per liter by March. Under the severe scenario (crude at $140/barrel through September), diesel could approach ₱97 and gasoline ₱89. The prospect of ₱90-per-liter gasoline, once unthinkable, is now being discussed in official government briefings.
In Philippine market history, diesel has never before exceeded gasoline in price. That threshold was crossed in March 2026. It happened because diesel more directly tracks crude oil's middle-distillate market, and global crude has stayed above $100 per barrel — with 11 consecutive weeks of diesel price hikes preceding it.
How Oil Prices Become Grocery Prices
Many Filipinos think of fuel prices as a problem only for car owners. This is a misconception. Fuel underlies the cost of almost everything you buy.
Consider the journey of a kilogram of pork from a farm in Batangas to your plate in Quezon City. A truck burns diesel to carry the hog to a slaughterhouse. A refrigerated van burns diesel to deliver the meat to a market. The market vendor pays higher electricity because Meralco's power generation relies on fossil fuels. The packaging was made in a factory that runs on electricity. The detergent you used to clean the cutting board was manufactured from petrochemical inputs. Every single link in that chain is affected by the price of fuel.
The PSA has confirmed that over 36 percent of the consumer price index (CPI) basket is directly or indirectly vulnerable to oil price movements. ING estimates that a 10-percent jump in oil prices can quicken Philippine inflation by as much as 40 basis points (0.40 percentage points). With food comprising 45 percent of the CPI basket on its own, even modest logistics cost increases translate into noticeable price changes at the wet market.
DEPDev's projections are sobering. Under the moderate conflict scenario, inflation could reach 4.5 to 5.1 percent in March — already breaching the BSP's 2-to-4 percent target range. Under the severe scenario, inflation could hit 6.3 to 7.5 percent. Prior to the conflict, the government's full-year inflation forecast was 3.6 percent.
The Peso Makes Everything Worse
Oil is priced globally in US dollars. When the peso weakens, every barrel of imported crude costs more pesos to buy — even if the dollar price stays the same. Since the conflict began, the peso has fallen to record lows of ₱59.50 against the dollar. MUFG Bank projects the peso could weaken further to ₱59 to ₱61 if crude stays above $90 per barrel and the conflict remains unresolved.
A weaker peso creates a double blow: it raises the cost of oil imports directly, and it also raises the cost of every other imported good — from raw materials for factories to consumer electronics to imported food. The Philippine Institute for Development Studies estimates that sustained peso weakness would widen the trade deficit and put further depreciation pressure on the currency, creating a cycle that is difficult to interrupt without BSP rate action.
Your Electricity Bill Is Next
Meralco's effective generation charge is tied partly to natural gas and oil-based power plants. As global fuel prices rise, generation costs rise, and these are eventually passed through to consumers' monthly bills. MWSS has also confirmed that water rates will increase in April. The combination of higher electricity, water, and fuel costs represents a significant compression of disposable income — particularly for lower-middle and middle-class households where these fixed expenses are already a large share of the monthly budget.
What the Government Is Doing
President Marcos has certified as urgent a bill granting emergency powers to temporarily suspend excise taxes on fuel products. DEPDev estimates that suspension could reduce prices by around ₱6 per liter for diesel and ₱10 per liter for gasoline — meaningful relief, but not enough to fully offset current hikes. The government has also moved to a four-day on-site workweek for some government offices to reduce fuel consumption, and is encouraging carpooling and flexible work arrangements.
These are cushioning measures, not solutions. The underlying driver — global oil prices — is outside the Philippine government's control.
What This Means for Your Household Budget
If you drive or commute, your transport costs have already risen. If you pay electricity, your next bill will be higher. If you eat (which is everyone), your grocery spending is being squeezed from both ends — by higher logistics costs already baked into retail prices, and by a weaker peso that raises the landed cost of imported food.
The households hit hardest are those in the lower-middle and low-income classes, where food and transport together represent 60 to 70 percent of monthly spending. For these families, even a 5 percent increase in staple food prices — which is a conservative estimate given current logistics pressures — can eliminate an entire month of marginal savings.
If you want to understand how inflation is affecting your specific income level and province, our calculator uses live CPI, fuel, and Meralco data to give you a cost-of-living adjusted picture of exactly where your household stands today.