Israeli air defenses intercept Iranian missiles over the skies of Tel Aviv, Israel. Photo: Xinhua/VNA  

Analysts at finance firm VinaCapital said the direct impact from rising geopolitical tensions in the Middle East on Vietnam’s economy under the baseline scenario is expected to remain limited although the conflict is pushing up 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. Exports to the Middle East account for less than 3% of Vietnam’s total export turnover, while the likelihood of a large-scale and prolonged ground campaign in Iran is considered relatively low.

VinaCapital views the situation as a more intense version of last year’s “12-day conflict”, meaning tensions may last longer but mainly create a sharp yet short-term shock to global financial markets.

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%, potentially pushing Vietnam’s CPI inflation from around 2.5% year-on-year to nearly 4% in the coming months.

However, fuel accounts for only about 4% of Vietnam’s CPI basket, while food and foodstuffs – largely produced domestically – make up nearly 36%. As a result, the energy price shock is considered manageable, although higher transport and logistics costs may push up domestic prices.

Higher oil prices could also weigh on GDP growth, as Vietnam is a net energy importer with net imports equivalent to about 1% of GDP relative to energy consumption. Nevertheless, the Government still has room to offset this impact through growth-supporting measures.

The oil price surge may also be partly cushioned by plans from the Organisation of the Petroleum Exporting Countries (OPEC) to raise output from April, while fuel inventories – particularly in China – are reportedly at multi-year highs.

Meanwhile, 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 year.

In a less favourable scenario where oil prices exceed 100 USD per barrel, inflation could rise above 5% and deposit rates climb beyond 7–8%, while GDP growth may fall by about two percentage points.

Higher energy costs would also hit household spending. Currently, Vietnamese households spend about 6% of their total expenditure on petrol and gas. If oil prices rise by around 70%, this share could exceed 10%, forcing households to cut spending on other items.

On the stock market, rising oil prices, shipping costs and interest rates may increase short-term volatility and widen sectoral divergence. Petroleum retailers, oil refiners, oilfield service firms, natural rubber producers, shipping and port operators, as well as fertiliser and gold businesses, may benefit.

By contrast, fuel- and rate-sensitive sectors such as airlines, tourism and real estate could face pressure.

Overall, VinaCapital analysts believed the impact of Middle East tensions on Vietnam’s economy will likely remain short-term and moderate, while market fluctuations could create opportunities for long-term investors to accumulate stocks at more attractive valuations./.