Thailand Sees Capital Outflow as Iran War Fuels Oil Spikes

Foreign investors are pulling out of Thai assets as an energy shock driven by the US-Israeli war against Iran sends oil prices near $100 a barrel, raising concerns over Thailand’s fragile economic recovery.

The selloff comes as the war in West Asia threatens to deepen Asia’s energy vulnerability, with Thailand heavily exposed due to its reliance on Gulf supplies for nearly half of its oil and gas, according to Krungsri Research.

The downturn has unsettled early optimism over Thailand’s economic outlook under Prime Minister Anutin Charnvirakul, whose recent electoral victory had briefly revived investor confidence and expectations of policy stability.

Foreign investors had returned to Thai markets earlier this year, with $1.7 billion flowing into equities in February, LSEG data showed. However, sentiment reversed sharply after the escalation of the war on Iran, triggering $823 million in equity outflows in March and $705 million in bond withdrawals.

Thailand’s economic vulnerability

Analysts warn that sustained high oil prices could weigh heavily on consumption, exports, and tourism, all key pillars of Thailand’s economy. Portfolio managers say markets may be underestimating the longer-term impact of the energy shock, particularly if fuel costs remain elevated throughout the year.

The pressure comes at a time when Thailand’s economy is already struggling with weak growth, limited inflation, and rising fiscal constraints. Economists say the Southeast Asian country is increasingly caught in a policy bind, with little room for aggressive monetary or fiscal intervention.

Inflation trends and subdued growth have already pushed the central bank toward rate cuts, but further easing risks weakening financial stability. Finance officials have also acknowledged limited policy space, with public debt approaching 70% of GDP, a self-imposed ceiling that constrains fiscal expansion.

The Thai baht has weakened in response to global energy pressures, though earlier gains in 2025 have provided some buffer compared to regional peers.

Despite short-term stabilization following a temporary ceasefire, investors remain cautious about Thailand’s exposure to external shocks, particularly in energy markets.

Analysts warn that prolonged war could further strain the currency, inflation outlook, and overall growth trajectory.

Oil tops $100 as US Hormuz threats trigger global market turmoil

On increasing oil prices, a record over $100 per barrel was hit on Monday, while global stock markets declined as investors reacted to an approaching US deadline linked to a potential blockade of the Strait of Hormuz. The move intensified concerns over energy supply disruptions from West Asia.

The renewed geopolitical tension follows failed ceasefire talks between Washington and Iran over the weekend, undermining expectations of a lasting resolution to a war already weighing on the global economy.

Market participants say the risk of rising inflation driven by higher oil prices and supply shortages is shifting attention toward corporate earnings, with several major listed companies set to release first-quarter results this week.