Soaring oil prices approaching US$100 a barrel is pressuring Thai inflation, which hit a three-month high in August, say analysts, as lingering hostility in the Middle East and the impacts of the “super El Niño” weather phenomenon on crops could push consumer prices up by 3% later this year.
The consumer price index (CPI) expanded by 2.53% year-on-year in August, surpassing the previous month’s increase of 1.95% and market expectations of 2.43%, according to Asia Plus Securities (ASPS).
This increase stemmed from both food and other categories, with prices rising for 310 goods and services, led by fuel, public transport, and agricultural/food products, such as curry over rice, rice, chicken and vegetables.
“Compared with the previous month, the CPI increased by 0.56%. I believe this is a signal that needs to be closely monitored because if the month-on-month rate does not decline from this level, inflation could remain above 2.5% for the rest of the year,” said Therdsak Thaveeteeratham, executive vice-president of ASPS.
“The question is whether the month-on-month rate will really remain unchanged because oil prices are still high compared with last year, and even compared with the previous month, they have continued to rise.”
Brent crude traded as high as $99 per barrel on Tuesday, supported by ongoing instability in the Middle East and a potential agreement between Iran and Oman to regulate shipping through the Strait of Hormuz, which could potentially lead to the introduction of transit fees in the future. Such fees would conflict with the US position advocating free navigation through the strait.
Mr Therdsak said the greater concern for Thailand is the El Niño phenomenon. Data from the US National Oceanic and Atmospheric Administration indicates an 81% chance of El Niño developing into a very strong pattern between October-December 2026, extending into early 2027.
This weather pattern often directly impacts agricultural yields, leading to droughts and significantly driving up prices of food items in the inflation basket, especially rice, meat and fresh vegetables.
An impending drought could push the inflation rate higher than the Bank of Thailand’s forecast, implying a continued risk that the Monetary Policy Committee might have to raise interest rates in the future, he said.
BofA (Bank of America) said in a research note the latest Thai inflation data provides further evidence that cost pass-through is becoming more visible, although it is concentrated in selected categories.
“Looking ahead, headline inflation appears to have bottomed in July and looks likely to move higher over the coming months,” said the bank. “With energy prices rebounding, food inflation becoming more visible, and favourable base effects from last year, headline inflation could move closer to 2.9-3.0% year-on-year in the fourth quarter of 2026 or the first quarter of 2027.”
Punyawat Srisingh, senior economist at Siam Commercial Bank’s Economic Intelligence Center, said inflation is on course to increase further during the final four months of 2026. However, the full-year total is expected to remain below 2% as consumer prices expanded by only 1.37% year-on-year in the first eight months.