Thailand’s Recovery Hopes Sink as $100 Oil Spooks Investors

Foreign investors are pulling back from Thailand after the U.S.-Israeli war on Iran sent oil prices close to $100 a barrel, a shock that Reuters reported is hitting one of Asia’s most energy-exposed economies. The same account, also carried by The Japan Times, says the selloff is undercutting hopes that Prime Minister Anutin Charnvirakul’s February victory would usher in a steadier economic rebound.

Key developments

• Thailand had just started to win back foreign money before the latest shock. Reuters said overseas investors bought about $1.7 billion in Thai stocks in February, but that reversed sharply after the conflict escalated. In March, net equity outflows reached $823 million and bond outflows hit $705 million, the biggest combined monthly exit since October 2024.

• The country’s energy exposure is central to the story. According to the Reuters report, nearly half of Thailand’s oil and gas comes from the Middle East, and more than half of annual power generation is gas-based. That leaves Thailand unusually vulnerable when Gulf supply risks push fuel costs higher.

• The macro backdrop was already weak before oil prices jumped. Thailand’s economy grew 2.4% last year, while inflation had fallen for 12 straight months before the central bank cut rates in February. Reuters also said average inflation could reach as high as 3.5% this year depending on how the conflict develops, a sharp turn from first-quarter contraction in prices.

• Policymakers have limited room to cushion the hit. A Reuters version published by BusinessWorld said public debt is around 66% of GDP, close to the government’s self-imposed 70% ceiling. Bangkok has ruled out broad fuel subsidies for now, though it plans to absorb costs to keep electricity tariffs largely stable ahead of summer.

What to watch

The immediate question is whether the current ceasefire holds and whether oil prices stay elevated beyond April. Reuters quoted market participants warning that Thailand’s pain could deepen if the shock moves from a market headline into household bills, transport costs and day-to-day business operations.

Investors will also be watching the baht, inflation data and any shift in fiscal policy. For now, the government says it does not plan to raise the debt ceiling, but that position will be tested if energy prices remain high and growth expectations weaken further.

Sources

• The Japan Times: Foreign investors flee Thailand as Iran war, energy shock dash hope for economic revival
• Reuters via U.S. News: Foreign investors flee Thailand as Iran war, energy shock dash hope for economic revival
• BusinessWorld: Foreign investors flee Thailand as Iran war, energy shock dash hope for economic revival

Photo by Kate Branch on Unsplash