Updates on US/Israel-Iran Conflict: Local Policy Developments and Economic Implications

The ongoing conflict between the United States/Israel and Iran continues driving up global oil prices, prompting policy actions from the Philippine government. To manage the economic impact, authorities are rolling out energy conservation measures and exploring emergency laws to reduce fuel taxes and provide subsidies. With local inflation already quickening, these policy adjustments aim to stabilize food and transport costs and protect the broader economy from prolonged disruptions.

Local Policy Developments

As early as Friday, March 6, Malacañang Palace released a memorandum circular directing certain agencies under the Executive branch to implement a temporary four-day work week, either through compressing forty hours of work in four days, or by designating one work-from-home day. The memorandum also called for limiting official travel, and setting air conditioning temperatures to 24 degrees Celsius. In Metro Manila, the local government units of Makati, Mandaluyong, and Manila among others have adjusted their working hours to implement a localized 4-day work week structure.

Certain legislative measures are being proposed to cushion the effects of the crisis on oil prices and supply. President Ferdinand Marcos, Jr., formally requested for Congress to grant him emergency powers to reduce the fuel excise tax temporarily. Analysts believe rationing the supply of oil would be a more efficient stabilizer for supply, however, which the government has not explicitly discussed yet. 

Both chambers of Congress are scrambling to use legislation to address the emerging situation, with Senate President Vicente “Tito” Sotto III committing to fast-track the President’s requested measures, which include proposed amendments to the Biofuels Act of 2006 to allow the purchase and use of cheaper bioethanol. Separately, Senator Risa Hontiveros pushed for a PHP 52.9-billion (USD 892.59 million) emergency supplemental budget, rerouted from other sources in the 2026 national budget. This is divided into PHP 12 billion (USD 202.44 million) for transport subsidies, PHP 2.9 billion (USD 48.92 million) for agriculture, and PHP 38 billion (USD 641.06 million) for repatriation of Overseas Filipino Workers (OFWs).

Government agencies are notably monitoring price increases and looking for alternative oil sources. The Office of Civil Defense requested local government units in Metro Manila to monitor fuel prices at gas stations and “maintain market stability” within their areas of scope, especially where residents appear to plan to hoard fuel. Despite these, fuel stations especially in the provinces are allegedly struggling to stay below the price thresholds set by the Department of Energy (DOE), as supply depots are said to provide stocks as high as PHP 82 (USD 1.39) per liter. Earlier on Thursday, March 5, Oil Industry Management Bureau (OIMB) Director Rino Abad said the government is considering procuring at least one million barrels of diesel to augment the supply of the local market. Energy Secretary Sharon Garin separately assured the public that supply will be managed, but acknowledged that some supplying countries like Singapore, Qatar, China, Thailand have already halted exports.

Analysts foresee a possibility for the conflict to prolong, hence impacting energy prices and availability longer than is ideal. Kamal Kharazi, foreign policy adviser to Iran’s Supreme Leader, ruled out diplomacy in ending the war and noted they will only reconsider should “economic pain” brought by pressure from other countries be felt in Iran.

Economic Implications

In February 2026, the Philippines’ inflation rate was recorded at a 13-month high of 2.4 percent, driven primarily by faster increases in food and beverage prices. The rising prices of oil and rice observed in the market are anticipated to place upward pressure on domestic food, transportation, and electricity costs.

The rise in oil prices is expected to primarily drive prices of goods and services in the following months. As of writing, fuel prices have increased by the liter as such: 

• Gasoline by PHP 7.00 to PHP 13.00 (USD 0.12 to USD 0.22),
• Diesel by PHP 17.50 to PHP 24.25 (USD 0.30 to USD 0.41), and 
• Kerosene by PHP 32.00 to PHP 38.50 (USD 0.54 to USD 0.65). 

According to National Statistician Dennis Mapa, approximately 36 percent of the country’s representative consumer goods and services, which include transport fuel, electricity, and agricultural products, are sensitive to oil price fluctuations. Additionally, disruptions to global shipping and aviation routes are increasing business production costs, which subsequently affect consumer retail prices.

Brent crude, the international benchmark for oil prices, was trading between USD 85 to USD 90 (PHP 5,038 to PHP 5,335) per barrel on Tuesday, March 10, following a brief weekend peak of USD 119 (PHP 7,054). These price levels are comparable to the market conditions observed during the onset of the Russia-Ukraine war in early 2022, when crude prices reached approximately USD 130 (PHP 7,706) per barrel. 

Historical data from 2022 indicates that similar surges in global oil prices directly translated to higher domestic fuel costs and elevated inflation and interest rates in the Philippines. Analysts note that the oil price surge observed in 2022 was a direct effect of the initial supply shock, geopolitical panic, and market speculation that accompanied the outbreak of the war.

Another driver for a possible inflation uptick in the coming months is an upward trend in rice costs that has been observed since November 2025. Since the Philippines is the world’s leading rice importer, bringing in 4.8 million metric tons in 2024, any fluctuation in global rice prices significantly impacts the country's overall inflation rate.

In response to these inflationary risks, the Bangko Sentral ng Pilipinas (BSP) is expected to evaluate its monetary policy actions. The central bank may pause its current easing cycle or increase benchmark interest rates once oil hits USD 100 (PHP 5,928) per barrel to manage inflationary pressures, according to BSP Governor Eli Remolona. Consequently, these potential policy adjustments could influence the pace of domestic business expansion in the near term.

These developments pose risks to the Philippines’ economic growth prospects, particularly as the country seeks to rebound from the slow economic growth recorded in 2025. This previous slowdown was largely attributed to the economic fallout from domestic conflict and an infrastructure corruption scandal.
Clients may view detailed assessments and insights provided in PSA’s recent publications on Philippine Economic Outlook Navigating the US/Israel-Iran Crisis and the February 2026 Monthly Economic Report.