Fuel Prices to Rise Sharply Amid Middle East Tensions – DOE

Motorists and transport operators in the Philippines were urged to prepare for sharp increases in fuel prices next week, as the conflict between Israel and Iran continues to rattle global energy markets.

The Department of Energy (DOE) on Friday said diesel prices could surge by PHP 4.30 to PHP 4.80 per liter.

Gasoline may go up by PHP 2.50 to PHP 3.00 per liter, while kerosene could increase by PHP 4.25 to PHP 4.50 per liter, based on the first four trading days of the week and developments in international oil markets.

“Major oil price shock looming as Israel-Iran conflict threatens critical global shipping passage,” DOE–Oil Industry Management Bureau (OIMB) Director Rodela Romero said in a message.

Romero pointed to the Strait of Hormuz—a strategic waterway controlled by Iran and a conduit for roughly 25% of global oil traffic and one-third of the world’s liquefied natural gas exports—as a flashpoint.

The recent military escalation saw Israel bombing Iranian nuclear facilities on June 19, followed by Iran’s retaliatory drone and missile strikes.

Oil benchmark Brent crude climbed nearly 3% after the strikes, while West Texas Intermediate (WTI) crude rose around 10% over the past week, triggering concern over ripple effects in pump prices, inflation, and economic stability.

DOE OIMB Director Rino Abad, however, said that despite the volatility, there is no immediate disruption in supply.

“Seventeen million barrels of oil per day are still accessible from the Persian Gulf area,” Abad said, adding that Iran continues to export roughly 1.6 million barrels daily and that the Strait of Hormuz remains operational.

Investors are closely monitoring whether the United States will intervene more directly in the conflict, especially after reports that it has deployed B-2 bombers to Guam.

These aircraft are capable of delivering bunker-buster bombs intended to disable Iran’s underground nuclear facilities, though U.S. officials have not confirmed whether this move is linked to the regional conflict.

“The move just underscores the administration’s willingness to threaten to intervene,” said Mark Spindel, chief investment officer of Potomac River Capital LLC.

“I think this will help oil prices stay higher; the easy direction for them right now is up at this point,” Spindel added.

While U.S. equities have largely shrugged off the geopolitical volatility so far, analysts warn that a deeper American involvement in the Israel-Iran conflict could provoke a broader market selloff.

Art Hogan, chief market strategist at B Riley Wealth, said: “If you get disruption to supply of oil product on the global marketplace, that is not reflected in today’s WTI price and that is where things get negative.”

Oxford Economics has modeled three possible scenarios: a de-escalation of the conflict, a complete halt in Iranian oil production, and a closure of the Strait of Hormuz.

The most severe outcome could drive global oil prices to as high as USD 130 per barrel, pushing U.S. inflation to 6% by year-end.

“Although the price shock inevitably dampens consumer spending because of the hit to real incomes, the scale of the rise in inflation and concerns about the potential for second-round inflation effects likely ruin any chance of rate cuts in the US this year,” Oxford said in a note.

Global benchmark Brent crude futures have risen as much as 18% since June 10, peaking at USD 79.04 on Thursday—a five-month high—according to Reuters.

Volatility in oil pricing has outpaced that of other asset classes, although equities may soon catch up should energy costs spike further, analysts added.

“Geopolitical tensions have been mostly ignored by equities, but they are being factored into oil,” Citigroup analysts wrote in a note.

“The key for equities from here will come from energy commodity pricing.”

The S&P 500 has shown resilience so far, declining only marginally after Israel’s initial strike but recovering quickly—echoing trends seen after previous Middle East conflicts.

However, should oil prices jump further and inflation fears intensify, analysts believe the U.S. dollar could see temporary gains from safe-haven buying, followed by potential long-term weakening if the conflict drags out.

“Traders are likely to worry more about the implicit erosion of the terms of trade for Europe, the UK, and Japan, rather than the economic shock to the U.S., a major oil producer,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.

He noted that during the U.S. invasions of Afghanistan and Iraq in the early 2000s, the dollar initially rose but ultimately weakened over time.

Back in the Philippines, jeepney drivers and other public transport operators already grappling with high operating costs may feel an even heavier burden in the coming week.

Their long-standing fare hike petitions remain pending with regulatory agencies as the fuel spike threatens to erode income further.

The DOE said it will continue monitoring global oil price movements and release final fuel price adjustments on Monday. (With reports from Reuters)