MUFG’s Senior Currency Analyst Michael Wan has highlighted the risks facing the Vietnamese Dong (VND) amid ongoing geopolitical tensions in Iran and the Middle East, particularly if the Strait of Hormuz remains closed and Brent oil prices stay elevated around US$100 per barrel [1]. According to Wan, a prolonged conflict could push the USD/VND exchange rate above 27,000 in 2026, significantly higher than the bank’s current base case forecasts of 26,300 by March 2026 and 26,600 by December 2026, which assume a de-escalation after March and a return of oil prices to pre-conflict levels over time [1].
Wan further notes that in a 'left tail risk scenario,' where oil prices sustain at US$120 per barrel and energy shortages become meaningful, the USD/VND could reach 27,700 or even higher [1]. Despite Vietnam’s relative resilience compared to other Asian economies such as India and the Philippines, the analyst warns that significant energy shortages could have indirect negative spillover effects on sectors like manufacturing and global growth, ultimately weighing on Vietnam’s economy as well [1].
The report does not provide specific market reactions but underscores the potential for stagflation pressures to build if energy shocks persist. MUFG’s outlook is cautious, emphasizing the uncertainty surrounding the Iran and Middle East conflict and the importance of monitoring oil price developments [1].
CONCLUSION
MUFG’s analysis suggests that the Vietnamese Dong faces considerable downside risk if geopolitical tensions and energy shocks persist, with USD/VND potentially rising well above current forecasts. The bank’s base case assumes eventual de-escalation, but warns that sustained high oil prices and energy shortages could have broader negative impacts on Vietnam’s economy.