Thai Baht : Energy shock leaves THB vulnerable – MUFG

MUFG’s Lloyd Chan argues that the Thai Baht is particularly exposed to prolonged Middle East conflict and elevated Oil prices. Thailand’s large net Oil and gas deficit, weakening terms of trade and relatively low domestic yields undermine the currency’s appeal. The report concludes that these factors leave THB vulnerable to further downside against the Dollar.

Large Oil deficit weighs on Baht

"The Thai baht stands out as particularly vulnerable to prolonged Middle East conflict."

"Thailand runs one of the largest net oil and gas trade deficits in the region, leaving its external position highly exposed to energy price shocks."

"At the same time, domestic yields remain relatively low, while headline inflation has rebounded towards 3% in May following a period of deflation in 2025, eroding the baht’s real carry attractiveness."

"This combination of weaker terms of trade and limited carry support leaves THB especially exposed to further downside pressure, particularly if Middle East tensions escalate further."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)