The rapid increase in energy prices caused by the prolonged war in the Middle East is taking a toll on Thai consumers, who are already reeling under high household debt.
The prices of crude oil and natural liquid gas have risen sharply since the US-Israel war on Iran broke out in late February.
The Thai government has been forced to intervene in the energy market, particularly diesel which is essential for the transportation, manufacturing and agricultural sectors, blowing a hole in its finances. The intervention has resulted in a deficit of 62 billion baht in the Oil Fuel Fund as of April 20.
Government response and fiscal impacts
More state measures are expected to follow, including increased government borrowing and additional cost of living relief.
“Higher inflation is a cause for concern this year. The impact may be more serious than during the previous four energy crises,” says Asia Plus Securities executive vice president Therdsak Thaveeteeratham.
He was referring to oil crises in 1973, 1979, 1990 and 2022, when crude oil prices skyrocketed 64-300 per cent. This resulted in inflation spiking within 1-2 quarters later and caused an economic slowdown for 1-3 years. “The inflation risk in 2026 may be much higher than in the past, as the military strikes have directly targeted energy infrastructure, severely reducing production capacity for a much longer period,” he warned.
Inflation trends and price pressures
Before the Iran war, Thailand’s inflation rates were in negative territory but this trend is set to reverse. The inflation would have been much higher but for the government implementing mitigation measures. According to the Commerce Ministry’s recent Consumer Price Index report, Thailand’s inflation rate in March 2026, while still negative at minus 0.08 per cent year on year—the 12th consecutive month of decline—was starting to reflect the impact of the war in the Middle East. Thailand’s headline inflation rate in March was a slower rate of negative growth compared to February’s minus 0.88 per cent year on year.
The energy price index showed a surprising decline at minus 2.8 per cent year on year, despite the pressure on global energy prices. In March, the average price of Brent crude oil increased by approximately 38 per cent year on year. Meanwhile, domestic energy prices continued to decline due to government subsidies, particularly the freeze on the retail price of diesel at 29.94 baht per liter until March 17.
However, the conflict in the Middle East has led to price increases in some items. The proportion of items with price increases rose from 47.6 per cent to 49.8 per cent of the total 464 items in the inflation basket. Significant price increases in March 2026 included construction materials and public transportation fares.
Economic outlook
“In 2026, Thailand’s inflation rate is projected to rise to 3.4 per cent, from the previous forecast of around 0.4 per cent. The potential turnaround to positive territory is expected in April,” according to Kasikorn Research Center.
The International Monetary Fund has projected Thailand’s inflation rate at 0.9 per cent this year, up from minus 0.1 per cent last year.
Meanwhile, the Asian Development Bank (ADB) also raised inflation concerns, projecting the inflation rate at 1.3 per cent this year. The development bank has projected that economic growth will see a further slowdown this year from 2.4 per cent to 1.8 per cent. Some research houses have projected much slower economic growth, most likely lower than 1 per cent.
Slower growth would impact workers who face stagnant wages while coping with higher costs for goods and services, as businesses are likely to hike prices to pass on higher operational costs. Many Thai consumers are already coping with high household debt, at around 87 per cent of gross domestic product.
Changing consumer behavior
Consumer spending saw a spurt in March, but this was driven by “panic buying” as consumers hoarded essential goods including oil fuel, worried about rising prices, according to a survey of the Retail Sentiment Index conducted by the Thai Retailers Association and the Bank of Thailand.
Nat Wongpanich, president of the association, said that the purchasing power situation over the next 12 months remained fragile and was contracting. This was due to pressure from household debt, which remained high, while the situation in the Middle East had driven up energy prices and the cost of living. As a result, Thai consumers are placing greater emphasis on “value for money”, clearly moving toward what is called “value conscious consumption”.
“Customers are prioritising price and promotions in making purchasing decisions. There is a clear trend of favouring house brands and second-tier brands. Consumers are planning their spending in advance, buying only when there are promotions, and using omni-channel strategies to compare prices and value for money,” he added.
