When the Middle East burns, the Filipino nanay feels the heat

(Part 1 of 2)

On Feb. 28, the world watched as the US-Israel coalition launched coordinated airstrikes on Iranian nuclear and military infrastructure, which also killed Supreme Leader Ayatollah Ali Khamenei and top security officials. The Iranian Revolutionary Guard Corps launched retaliatory strikes on at least 27 US military bases across Bahrain, Kuwait, Qatar, and the United Arab Emirates (UAE). As a result, global oil markets have been shaken.

I also first learned of the vulnerability and strategic value of the Strait of Hormuz (a narrow waterway between Iran to the north and Oman and United Arab Emirates to the south) that serves as the world’s most critical oil chokepoint where roughly 20% of the world’s daily oil supply transits.

For Washington or Tel Aviv, this may be a strategic confrontation aligned with their reading of the geopolitical dynamics in the region. For a Filipino nanay (mother) running a sari-sari (sundry) store in Bulacan, or a tricycle driver in Iloilo, or the family in Tawi-Tawi waiting for their monthly padala (remittance) from a sister working in Dubai — it is a quiet catastrophe slowly arriving at their doorstep.

Currently immersed in the Philippine microfinance sector — serving nearly 2.5 million women entrepreneurs through ASA Philippines Foundation, Inc. and working with MFIs on livelihood recovery through RestartME, Inc. — I have witnessed firsthand how distant shocks compress the household budgets of those least able to absorb them. This article is written not from the vantage point of geopolitics, but from the vantage point of the MFI center meeting where the weekly loan installment and savings are done, and the mother who must decide whether to pay her loan or withdraw their savings to feed her children and pay their transportation to go to school.

I write this because I see a parallel between how this crisis could unfold and how we lived through during the COVID-19 pandemic. And I write it to share my insights with my fellow practitioners in the microfinance sector and other stakeholders of poverty alleviation and to provide a starting point for further discussions as we find concrete last mile solutions to cushion the impending economic shock of higher prices and a weaker purchasing power for the most marginalized and vulnerable families in the country.

A PANDEMIC PARALLEL: WHAT WE MUST NOT FORGET
The COVID-19 pandemic taught us three important lessons. First, the scale of impact was global and nationwide. Second, the uncertainty of the timeline was paralyzing: just as we could not know when vaccines would arrive, we cannot today know when a ceasefire will happen and if it will hold or when oil flows will normalize. Third, the effects were not acute — they were chronic. Long COVID ravaged the bodies of survivors; “long economic COVID” is still ravaging the finances of microenterprises that have yet to fully recover.

The Middle East crisis carries all three attributes. The scale is already global and nationwide — oil prices have dramatically increased while upward adjustments of food costs and freight rates are following suit. Repatriation of overseas Filipino workers (OFWs) has started, which in turn could affect remittance flows. The endgame is unknown: military analysts and diplomats cannot agree on the desired final state in the region, much less a timeline for reaching it. And the economic consequences — particularly for an import-dependent archipelago like the Philippines — will not resolve quickly. The Philippine inflation rate has not dropped to a negative level since the COVID-19 pandemic, which means that low income households are still dealing with the same high prices of goods pushed by the pandemic which could be further pushed up due to these recent developments. This makes it more difficult for families operating on daily cash flows to cope with such aggravated pressures.

HISTORY HAS ALREADY WRITTEN THIS SCRIPT
The Philippines has lived through Middle East conflicts before, and each one left a mark on ordinary families. That history is not reassuring. It is a pattern.

According to Federal Reserve History data, the 1973 Arab Oil Embargo Oil prices quadrupled practically overnight. This was the first major shock for the Philippines, which imports almost all its oil. It is like a family whose only source of fuel for cooking and transport suddenly became four times more expensive. Inflation spiked, jeepney fares rose, and the poor — who spend a significant share of their income on transport and basic goods — carried the heaviest burden.

The 1990 Gulf War was the most personally traumatic for Filipinos. According to a 2001 Philippine Star article, over 100,000 Filipinos were working in Kuwait and many of them had to be evacuated when Saddam Hussein invaded Kuwait. The government scrambled to assemble a ₱1 billion repatriation fund. The economic damage to families was severe and long-lasting. It took years for OFW deployment to the Gulf to fully recover.

SHOCKWAVES HEADING FOR FILIPINO SHORES
However, what started on Feb. 28 is not similar to the past conflicts. The scale is different and the endgame is still uncertain. It is not a targeted strike on one country and is now emerging as a protracted conflict affecting so many more Middle East countries where many Filipinos are gainfully employed.

In every major Middle East conflict, the Philippines is hit through three critical channels: 1. increased oil prices; 2. the inflation that follows; and 3. OFW safety and remittances.

SHOCKWAVE 1: OIL PRICES AND THE COST OF EVERYTHING
Oil is what moves jeepneys, tricycles, delivery trucks, and fishing boats. It is what keeps electricity running. When oil goes up, everything goes up — and the most vulnerable families, who spend the greatest share of their income on transport and food, absorb the greatest burden.

The Philippines imports almost all its oil. Analysts are already warning that a prolonged conflict could disrupt up to 20% of global oil supply. The most dangerous scenario is a Strait of Hormuz blockage. According to a Bloomberg report, the Strait of Hormuz remains effectively closed to almost all but Iran-linked traffic, with the conflict now in its second week. If this persists, it is predicted that global oil markets would face their most severe supply shock in decades.

In household terms: imagine the only road to the wet market is blocked. Every vendor must take a longer, more expensive route. Transport costs rise. And who pays at the end of that chain? The low-income family buying their kilo of rice and bangus.

SHOCKWAVE 2: THE PESO WILL WEAKEN AND INFLATION WILL BE HIGHER
It has been a pattern that when global uncertainty happens, investors flee to the US dollar. As a result the peso weakens. A weaker peso directly raises the cost of everything the Philippines imports, which are actually attached to many basic necessities of low-income families. The Bangko Sentral ng Pilipinas (BSP) had already nudged its inflation forecast upward to 3.6% for 2026 before this crisis. That number is now almost certainly going to be revised significantly higher.

The BSP, which had been in an easing cycle to stimulate domestic growth, may have to shift gears if inflation re-accelerates — potentially freezing or reversing the rate cuts that small businesses and microenterprises are banking on. For MFI clients that are operating on thin daily margins, even a slight increase in transport and food costs can tip a viable microenterprise into distress.

SHOCKWAVE 3: THE OFW LIFELINE IS THREATENED
Think of OFW remittances as the savings that one hardworking family member sends home every month. For the Philippine economy, that is roughly $40 billion a year — a valuable income stream for millions of low-income families. Unfortunately, that hardworking family member is working right in the middle of where bombs are falling.

A BusinessWorld article indicated that the Department of Foreign Affairs estimates around 2.41 million Filipinos across Middle East countries are caught in the crossfire of Iranian retaliatory strikes.

While we continue to pray that our OFWs will not be directly harmed by airstrikes, the possible disruption to their employment remain real. If the conflict is protracted, employers could shut down operations; airports could be closed. We are already seeing major disruptions in the Dubai International Airport with passengers stranded due to flight cancelations. When OFWs are retrenched, remittances stop.

(To be continued.)

Rafael C. Lopa is the president and CEO of ASA Philippines Foundation (www.asaphil.org), a microfinance NGO serving close to 2.5 million women entrepreneurs across all provinces of the Philippines. He is also the president of RestartME, Inc. (www.restartme.ph), an NGO mandated to work with microfinance institutions in addressing unexpected shocks to the lives and livelihoods of their clients and families. He co-funded the 2024 Philippine Microfinance Survey conducted by WeSolve Foundation.