Oil shock tightens the macro squeeze

From AB Capital's The Opening Bell: Three Moves

Event

Brent surged 7% to US$100.69/bbl after Houthi attacks on two Saudi tankers raised the risk of simultaneous disruption across the Red Sea and Strait of Hormuz. Wall Street sold off, led by technology, as markets repriced inflation, growth, and geopolitical risk.

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We think the move materially worsens the Philippines' near-term macro setup because oil above US$100 would deepen the import bill, lift transport and food costs, and reinforce peso weakness. If sustained, it would push inflation risks above our current base case (at 6.2% in 2026E) and delay policy normalization (we still forecast two 25bp hikes).

Catalyst

The key catalyst is whether shipping insurance, tanker traffic, and retaliatory strikes normalize over the next several weeks. A quick de-escalation could pull Brent back below US$90, while a prolonged two-route disruption would raise the probability of further Bangko Sentral ng Pilipinas (BSP) tightening and US dollar/peso (USD/Php) testing fresh highs.

Action

In our view, retain a defensive Philippine Stock Exchange index (PSEi) stance and favor Meralco (MER), Aboitiz Power (AP), ICTSI (ICT), and Apex Mining (APX), which offer regulated pass-through, domestic power exposure, dollar revenues, or commodity support. We would remain cautious on Cebu Air Inc. (CEB), GTCAP, discretionary consumption, and rate-sensitive property until oil and the peso stabilize.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.