As Middle East tension escalate: Rising prices, unemployment

CEBU CITY, PHILIPPINES — Central Visayas is facing the prospect of rising prices, reduced investment, and possible job losses as escalating tensions involving the United States, Israel, and Iran ripple through the region’s economy, as revealed by Department of Economy, Planning, and Development (DEPDev).

In yesterday’s Regional Development Council (RDC-7) Full Council Meeting, key government agencies, officials, and stakeholders assessed the economic and social impacts of the ongoing Middle East crisis.

It was chaired by Cebu Governor Pamela Baricuatro, with Cebu City Mayor Nestor Archival, Mandaue City Mayor Jonkie Ouano, Lapu-Lapu City Congresswoman Emmarie Ouano-Dizon, and Cordova Mayor Cesar Suan in attendance.

Inflation and rising costs

Engineer Raffy Dave Boyles, senior economic specialist of DEPDev-7, said Central Visayas could see inflation levels hit 4 percent in the coming months.

“As of February, the regional inflation is around 6 percent. For January, it was 5.6. For two consecutive months, Region 7 has had the highest inflation of all regions in the country,” Boyles said.

He warned that fuel price increases would further drive up costs for cement, steel, asphalt, and other materials, affecting both private and public sector projects.

“For the public sector, the President’s directive is to continue government projects. To mitigate impacts, variation orders will be applied to contracts,” Boyles said.

DEPDev also projected domestic retail prices could spike in the short term. Diesel prices may peak at 120.26 pesos per liter in April and gradually decline to 97.73 pesos per liter by May, while gasoline could rise to 133 percent if the conflict escalates further.

Employment threats

Boyles explained that both foreign and local investors may adopt a cautious stance due to geopolitical uncertainties. “Foreign investors will likely adopt a wait-and-see approach, while local investors may pause capital expenditures if the Bangko Sentral ng Pilipinas (BSP) hikes interest rates,” he said.

He also highlighted potential labor market effects. Underemployment could rise as individuals seek additional income, while businesses might reduce working hours to cope with higher costs.

“While the region prepares for a new batch of graduates, hiring fees may occur as businesses implement cost-cutting measures. This may increase the unemployment rate,” Boyles said.

As of January 2026, Central Visayas’ unemployment rate stood at 5.8 percent. Rising operational costs are expected to slow manufacturing output, affecting non-essential products.

The region, largely a net importer, may face higher costs as shipping disruptions increase freight, insurance, and supply shortages. “Some shipping companies are already imposing hikes and reducing vessel trips. This might escalate supply crunches, further driving up commodity prices,” Boyles warned.

Consumer confidence is also expected to decline. Households are likely to reduce discretionary spending to cope with inflation, further dampening demand.
Meanwhile, Micro, small, and medium enterprises (MSMEs) may face a “double squeeze” from higher production costs and reduced sales.

Agri, fishery and transport

The agriculture sector is similarly vulnerable. Rising fuel prices have reduced fishing trips, leading to lower yields and higher seafood prices. Transporting crops to markets will also become more costly, while livestock and poultry operations will be affected by higher feed prices due to the stronger dollar.

“Fisheries and farmers will face higher costs, and middlemen are expected to pass these increases to the market,” Boyles said.

Tourism in the region is projected to take a hit. Rising jet fuel and maritime costs have already prompted fare hikes and reduced trip frequencies. Lower tourist arrivals, combined with declining consumer confidence, could impact hotels, restaurants, and MSMEs reliant on travel.

Five potential dire scenarios 

DepDev Director of the National Policy and Planning Staff (NPPS), Desiree Joy O. Narvaez, presented the macroeconomic impacts of the ongoing Middle East crisis on the Philippine economy and various sectors during the meeting.

Narvaez plotted five possible scenarios should the US-Iran conflict escalate on a larger scale, specifically, in terms of the increasing prices of diesel and crude oil, the general inflation rate, the slowing down of GDP, and the possible surge of unemployment rates.

Given the situation, DEPDev estimated that domestic retail prices of diesel could spike as much as 160 percent, while gasoline could increase up to 133 percent on April.

“We do expect further escalation for April unless the peace talks that Trump has been saying…but Iran was denying,” Narvaez stated.

As assessed by DEPDev, the Philippine economy has already reached Scenarios 1 and 2 and is currently nearing Scenario 3.

Scenario 3 assumes that crude oil prices will average 150USD per barrel from March to May and then will gradually ease a bit in eight months until October this year.

Scenario 4 is described by Narvaez as the worst case. Crude oil could cost 150USD per barrel for four months until June, and will remain elevated because of the disruption of some energy infrastructures in Gulf countries such as Saudi Arabia and Qatar.

Price could average 80USD per barrel for 15 months, starting from March, until May 2027 as some energy plants could be severely affected by the bombing.
For Scenario 5, DEPdev presupposes that energy plants are extremely damaged, leading to an estimate of 200USD per barrel of crude, lasting for 6 months, and would continue to escalate until October 2027. “Hopefully, we won’t reach scenario 5,” Narvaez said.

If the conflict prolongs and the Philippines remains in Scenario 3, diesel prices could peak at 120.26 pesos per liter in April and gradually decreases on May to 97.73 pesos per liter. It is expected that general inflation will be at least 5.1 percent and as high as 5.6 percent during this time of economic crisis.

Narvaez also revealed that GDP could decline at 4.7 to 4.9 percent and could even slow down further, saying, “Now at scenario 5, the worst case scenario, we expect the trimming down of GDP, could be as low as 3.5 percent.”

On the other hand, unemployment rates dropped to a post-pandemic low of 3.7 percent, but with the current conditions, an observed escalation of unemployment persists.

Given all these assumptions and scenarios, the marginalized sector will be most affected by the escalation of prices and lower income caused by the economic repercussions of the Middle East conflict, which Narvaez described as a “…major challenge of the government’s target of making poverty a single digit in three years.”

Recommendations

RDC-7 members proposed several strategies to mitigate the economic fallout:

1. Local revenue incentives – Amending local codes to provide tax discounts for buildings installing solar rooftops or electric vehicle (EV) charging stations.

2. Support for MSMEs – Waiving business permit fees for one or two years for MSMEs transitioning to electric trikes, horse scooters, or other clean energy solutions.

3. Accelerated oil and gas exploration – Facilitating dialogue with Gas2Grid, an Australian company holding Petroleum Service Contract 85 covering 127,500 hectares in onshore Cebu, to fast-track local energy production.

“These measures aim to lessen the impact of rising fuel costs and stimulate local investment,” Boyles further said.