EASING THE SHOCK OF WAR

SEARCH FOR ALTERNATIVE MARKETS COULD PROVIDE A WAY OUT: EXPERTS

- MONGKOL BANGPRAPA AEKARACH SATTABURUTH

»»The escalating conflict in the Middle East, particularly the looming threat of a blockade of the Strait of Hormuz, is casting a long shadow over the economy.

While short-term impacts concern tourism, exports, and energy prices, experts warn that the country faces a significant “structural shock” if the conflict prolongs beyond a few weeks.

Energy and inflation woes

The conflict’s immediate repercussions have been felt in rising energy prices, particularly natural gas in Europe, which has nearly doubled. However, academics and entrepreneurs are more concerned about the potential for a deeper, long-term structural shock.

If the conflict persists for three to four weeks, the combined pressure of inflation and increased transport costs will present a formidable challenge for the government, demanding more than just short-term solutions.

Thailand’s reliance on the Strait of Hormuz for a substantial portion of its energy imports, including crude oil and natural gas for electricity generation, makes it vulnerable.

As Nonarit Bisonyabut, a research fellow at the Thailand Development Research Institute Foundation (TDRI), points out, any disruption to the vital shipping lane would inevitably cause a surge in domestic living costs due to skyrocketing energy prices. The burden would fall heavily on the public as long as the conflict continues.

Mr Nonarit outlines two scenarios for the conflict. The first involves a relatively short engagement of around 40 days, as anticipated by the United States.

"However, the more alarming prospect is a 'guerrilla war' characterised by drone or missile attacks targeting critical infrastructure like oil tankers or gas pipelines," he said. Such a scenario would lead to sustained global inflation, remaining elevated for an extended period.