The closure of the Strait of Hormuz following the escalation of the conflict in the Middle East has triggered a significant oil supply shock with wide-ranging consequences for global commodity markets. This study provides an initial econometric exploration of the inflationary effects of this shock on the Philippine economy. Using monthly time-series data from January 2018 to March 2026 drawn from the Philippine Statistics Authority, the Federal Reserve Economic Data, and the World Bank, the study estimates a series of pairwise vector autoregression models relating the Dubai crude oil prices to the major components of the Philippine consumer price index. Orthogonalized impulse response functions are then derived to characterize the direction, magnitude, and persistence of the oil price shock on domestic prices.
The results indicate that oil price shocks elicit statistically significant, positive, and persistent effects on overall CPI and non-food prices, with transportation registering the largest response at approximately 1.59% per one standard deviation shock. The food price index exhibits a comparatively muted contemporaneous response, which the study attributes to production and distribution lags rather than insulation from the shock. Given that recent oil price movements represent shocks of approximately four to five standard deviations, near-term inflationary pressures are expected to be considerably more severe. Anticipated increases in fertilizer prices are likewise expected to exert substantial upward pressure on food prices in subsequent quarters. The study recommends that the government adopt a longer-term perspective that includes tax relief measures, energy diversification, and investments in domestic agricultural productivity.