UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya review how higher global oil and gas prices may shift Thailand from a low-inflation setting to a cost-shock setting. They keep their 2026 baseline forecast at 1.8% real GDP growth and -0.3% average headline CPI. They describe the shock as external rather than demand-led, with Thai growth starting below potential while inflation remains soft. They focus on how long domestic prices can stay insulated from higher global energy prices.

From Low Inflation To Cost Shock

They set out scenarios where Dubai oil at USD80–100 per barrel raises Thai diesel prices over time, even with policy measures to cushion the impact. Under these scenarios, headline inflation rises faster than core inflation, while growth softens as households and firms face higher energy costs. They note that policy can smooth the effects of an oil shock but may not fully offset a large and prolonged rise in energy prices. They also state that forecasts may be reassessed if geopolitical tensions persist or if domestic price pass-through speeds up. We are currently navigating a tricky environment where weak underlying growth clashes with an external energy shock. Recent reports show Dubai crude consistently trading above USD85 per barrel throughout the first quarter of 2026, pushing us squarely into the cost-shock scenario. This means the baseline forecast of -0.3% inflation is becoming less likely by the day. As a net energy importer, Thailand’s trade balance is directly exposed to these higher global prices. Customs data from January and February 2026 has already revealed a widening trade deficit, directly linked to a jump in the value of energy imports. Therefore, positioning for a weaker Thai Baht against the US dollar through futures or options appears to be a direct and logical response. For the equity market, higher energy costs act as a drag on corporate earnings and dampen consumer spending. This external pressure on an already soft economy suggests a bearish outlook for the SET Index. Traders should consider using index futures to establish short positions or buying put options to protect against a potential downturn.

Trading Implications Across Rates Fx And Equities

The pass-through from energy to consumer prices seems to be starting, with February’s inflation figures turning positive for the first time in five months. Given the Bank of Thailand is unlikely to raise interest rates into a slowing economy, inflation-linked derivatives could offer a way to trade this divergence. This makes long positions in inflation swaps an interesting play on rising headline CPI. This situation reminds us of the period back in 2022, when oil prices surged and led to a sharp deterioration in Thailand’s current account and significant pressure on the Baht. The uncertainty of how quickly these costs will pass through to the wider economy suggests an increase in market volatility. Consequently, strategies that benefit from price swings, such as long volatility positions on the main equity index, should be evaluated. Create your live VT Markets account and start trading now.

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