According to MUFG’s Lloyd Chan, the Thai Baht (THB) is particularly vulnerable to ongoing Middle East conflict and elevated oil prices due to Thailand’s significant net oil and gas trade deficit [1]. The report highlights that Thailand runs one of the largest net oil and gas deficits in the region, which makes its external position highly susceptible to energy price shocks [1].
Additionally, the Thai Baht’s appeal is undermined by relatively low domestic yields and a recent rebound in headline inflation, which reached nearly 3% in May after a period of deflation in 2025 [1]. This erosion of the baht’s real carry attractiveness, combined with weaker terms of trade, further exposes the currency to downside pressure [1].
MUFG concludes that these factors collectively leave the THB especially exposed to further depreciation against the US Dollar, particularly if tensions in the Middle East escalate further [1].
CONCLUSION
MUFG’s analysis indicates that the Thai Baht is at risk of further weakening due to Thailand’s large energy deficit, rising inflation, and low yields. The currency’s vulnerability is heightened by ongoing geopolitical tensions and elevated oil prices, suggesting continued downside pressure if these conditions persist.