MUFG said sustained oil price spikes linked to the Iran conflict could weaken most Asian currencies because many countries in the region are net oil importers. It said KRW, INR and, to a lesser extent, PHP may be more exposed, while CNH and MYR may be more resilient. MUFG estimated CPI inflation across Asia could rise by about 0.1–0.9 percentage points if higher oil prices persist. It said Thailand, Vietnam, the Philippines and South Korea are the most sensitive to oil price increases.

Asian Central Banks And Policy Timing

MUFG said central banks in Asia may not raise rates solely because of this risk, but lower oil-related inflation and uncertainty could affect policy timing. It said rate cuts could be delayed in the Philippines and Indonesia, and the likelihood of cuts could fall in India and South Korea. MUFG said FX forward curves may steepen in some Asian markets due to higher risk premia. It added that JPY may outperform in the near term, while AUD may underperform. With Brent crude futures now pushing past $95 a barrel on renewed geopolitical risk, a sustained price spike will pressure Asian currencies. The region is dominated by net oil importers, creating a direct negative impact on their trade balances. We have seen this dynamic before, but the current market fragility makes the situation more acute. We believe traders should anticipate weakness in the South Korean Won, Indian Rupee, and Philippine Peso. South Korea’s February inflation just came in hot at 3.2%, and India is still battling inflation above 5%, making their economies highly sensitive to higher energy costs. These currencies are the most vulnerable given their high dependence on oil imports and, in the Won’s case, its high-beta nature.

Relative Resilience In CNH And MYR

Conversely, the Chinese Yuan and Malaysian Ringgit should show relative resilience in the region. Malaysia is a net energy exporter and directly benefits from higher crude prices, as reflected in Petronas’s strong earnings reports from last year. China’s continued access to discounted Russian oil provides a significant buffer that insulates its economy from the full force of global price shocks. This oil shock is unlikely to cause central banks to hike rates, but it will certainly delay anticipated rate cuts. We are now pricing out cuts for the Philippines and Indonesia for the foreseeable future, and the probability of cuts in India and South Korea has diminished significantly. The Bank of Korea’s minutes from last week already showed a more cautious tone even before this latest oil surge. For derivatives, we expect a steepening in FX forward curves, particularly for the INR and KRW. This reflects the rising cost of hedging and an increase in risk premia being priced into the market. Traders should be prepared for higher volatility and wider bid-ask spreads in these currency pairs. From a global perspective, this environment favors traditional havens like the Japanese Yen over high-beta currencies like the Australian Dollar. This risk-off positioning is consistent with patterns we observed during the market volatility spikes in late 2025. We would look to express these views through selling AUD/JPY as a proxy for broader risk aversion. Create your live VT Markets account and start trading now.

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