Analysts at investment firm VinaCapital said geopolitical tensions in the Middle East are expected to have only a moderate impact on Vietnam’s economy under the baseline scenario, despite driving global oil prices and safe-haven assets such as gold sharply higher.
According to Michael Kokalari, director of macroeconomic analysis and market research at VinaCapital, the conflict is unlikely to significantly affect Vietnam’s economic performance.
Exports to the Middle East account for less than 3 per cent of Vietnam’s total export turnover, while the likelihood of a large-scale and prolonged ground campaign in Iran is considered relatively low.
VinaCapital described the situation as a more intense version of last year’s “12-day conflict”, suggesting tensions could last longer but would mainly create a sharp yet short-term shock to global financial markets.
Oil prices and inflation pressures
The clearest impact on Vietnam’s economy would come from higher oil prices. Since the beginning of the year, global oil prices have risen about 30 per cent, potentially pushing Vietnam’s consumer price index (CPI) inflation from around 2.5 per cent year-on-year to nearly 4 per cent in the coming months.
However, fuel accounts for only about 4 per cent of Vietnam’s CPI basket, while food and foodstuffs, largely produced domestically, make up nearly 36 per cent. As a result, analysts consider the energy price shock manageable, although higher transport and logistics costs could raise domestic prices.
Higher oil prices could also weigh on GDP growth, as Vietnam remains a net energy importer with net imports equivalent to about 1 per cent of GDP relative to energy consumption. Nevertheless, the government still has room to offset the impact through growth-supporting measures.
The oil price surge may also be partly cushioned by plans from the Organisation of the Petroleum Exporting Countries to increase output from April, while fuel inventories, particularly in China, are reportedly at multi-year highs.
Currency and interest rate pressures
A stronger US dollar and rising gold prices could put depreciation pressure on the Vietnamese dong (VND). Combined with higher inflation, this may push 12-month deposit rates up by 50-100 basis points this year to around 7 per cent per year.
In a less favourable scenario where oil prices exceed USD 100 per barrel, inflation could rise above 5 per cent and deposit rates climb beyond 7-8 per cent, while GDP growth may fall by about two percentage points.
Higher energy costs could also weigh on household spending. Currently, Vietnamese households spend about 6 per cent of their total expenditure on petrol and gas. If oil prices increase by around 70 per cent, this share could exceed 10 per cent, forcing households to reduce spending on other items.
Market impacts and investment opportunities
On the stock market, rising oil prices, shipping costs and interest rates may increase short-term volatility and widen divergence between sectors.
Petroleum retailers, oil refiners, oilfield service firms, natural rubber producers, shipping and port operators, as well as fertiliser and gold businesses may benefit from higher commodity prices.
By contrast, sectors sensitive to fuel costs and interest rates, such as airlines, tourism and real estate, could face pressure.
Overall, VinaCapital analysts believe the impact of Middle East tensions on Vietnam’s economy will likely remain moderate and temporary, while market fluctuations could create opportunities for long-term investors to accumulate stocks at more attractive valuations.
