Hormuz after July

If the Strait of Hormuz remains closed after July, our economy will hit a critical breaking point between early July and mid-August, industry experts say. So far, a more severe outcome in world supply and prices was avoided because many countries, notably China, have significant strategic oil storage.

It also helped that US oil exports went up sharply as Europe and Asia began substituting US oil for disrupted Middle Eastern supply. Total US exports of crude plus petroleum products reportedly climbed to about 12.9 mbpd in April 2026.

The US has also been aggressively drawing down its Strategic Petroleum Reserve to help stabilize global supply. The US has become the world’s largest oil exporter, larger than Saudi Arabia.

But we are now facing the limits of those physical reserves. Secondary waves of inflation will now be determined by logistical timelines.

Food price inflation will be highest roughly four to six weeks after the July fuel shock caused by depleted reserves settles in. The 46 percent surge in raw urea fertilizer costs and skyrocketing domestic transport logistics will force Filipino farmers to demand drastically higher farm gate prices on the mid-year harvests.

By late July, consumers will face the compounded shock of expensive domestic produce and highly priced imported staples (like rice), also due to increased maritime freight rates.

MUFG, Japan’s largest bank, warns that “The indirect effects across a range of sectors could also be meaningful for the Philippines beyond the first order impact, and ultimately point to a stagflationary environment of higher inflation and weaker growth for the Philippines.”

Our OFWs are starting to get affected. As of May 21, 2026, the Philippine government has repatriated 9,854 Filipinos from the Middle East. It is a small portion of the 2.4 million Filipinos working in the war-torn region, but it is a warning nevertheless about the fragility of this vital leg of our economy.

Trump’s war is also deeply affecting sea-based Filipino workers, who found themselves on the front lines of physical danger. Over 5,600 Filipino seafarers in nearly 470 vessels have been stranded in the Persian Gulf, including those aboard commercial container vessels seized by Iran near the Strait of Hormuz.

Trump’s war has been cutting overseas deployments from the Philippines, potentially weakening remittances and adding inflation pressure at home, the International Labor Organization (ILO) said last week.

“The Philippines illustrates the risks for labor-sending economies,” the Geneva-based agency said in a report.

The ILO said that higher oil prices have disrupted shipping routes and weaker business confidence fuels inflation and labor market stress across Asia and the Pacific.

For now, remittances, a key driver of consumption, continued to show modest growth, according to BSP data. But migration and financial experts note that “geopolitical shocks do not instantly show up in central bank ledgers.”

There is a lag of several months for flight disruptions, contract terminations and job losses to dent the total volume of money moving through global banking networks. March was simply too early in the crisis to record a structural drop.

Even then, the ILO is raising concerns that prolonged Gulf disruptions could weigh on household spending and growth. The ILO revealed that OFW deployments to the Middle East contracted by 78 percent year-on-year following the escalation of hostilities.

Additionally, think tanks like Capital Economics warn that the lingering blockade of Hormuz could slash future Gulf remittances by 30 to 35 percent.

And we know from experience that higher prices increase pressure on household purchasing power. This also comes at a time when overseas remittances weaken. These trends could weigh on our domestic demand and labor markets.

There goes our heavily consumer-driven economy. Because the Philippines relies on domestic spending, the imported earning power of OFWs acts as a crucial domestic shock absorber.

Together with the BPO sector, OFWs provide the second of only two legs of our economy. OFW remittances provide a steady stream of foreign exchange that stabilizes the Philippine peso, shields local liquidity and funds imports given the limited exports of our small manufacturing sector, an OECD report pointed out.

OFW remittances also provide the foreign exchange needed to import 25 percent of our food requirements. As domestic farming yields drop due to high fertilizer costs, the country will be forced to import even more food to cover the supply gaps.

Trump’s war has been especially difficult for migrant Filipinos whose lives have been flipped. With wages four to five times higher than back home, the loss of their financial lifelines hurts their families depending on them.

Arab News tells the story of a Filipina domestic worker whose Syrian employers fled Dubai out of fear for their safety. She now takes part-time jobs but is unable to earn enough to cover rent and food. She now eats just one meal a day to cut costs. She is also unable to send money home.

And there is Tere and her husband who decided to go home from Bahrain.

She told Arab News that “The recent conflict, which still continues, made business more difficult as a lot of ongoing projects were understandably put on hold.”

Cindy, who has been in the UAE for almost two decades, told Arab News the war brought her fear and uncertainty.

Recklessness in governance has put us in this predicament. Our leaders since the first Marcos era carelessly left us to be heavily exposed to geopolitical developments.

Unable to create enough jobs at home, Marcos Sr. implemented what was meant to be a temporary program of sending workers abroad, which eventually became a major pillar of the Philippine economy. Now, we are very dependent on OFW remittances to fire up our consumer-driven economy.

Our post-EDSA governments recklessly shelved the energy self-reliance program they inherited. This is why we are still 98 percent dependent on Middle East petroleum supply.

So many things to attend to. So many things to prepare for. And all we get from our politicians is low class drama as they amass ill-gotten wealth. A pox on them all!

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco