How exposed are Philippine banks to Iran war?

Debt in oil-sensitive sectors could spill into the banking system.

Philippine banks have limited direct exposure to the Middle East, but risks remain through loans to industries vulnerable to oil price swings and supply disruptions, market analysts said.

“If these firms experience prolonged financial stress, their loan obligations become a transmission channel to the banking system,” the Bangko Sentral ng Pilipinas (BSP) said in a June report.

It identified a small group of Philippine companies with Middle East links, mainly in utilities, industrials, information technology, consumer staples, and financial services.

The BSP said weaker revenue and tighter margins in these sectors could hurt repayment capacity and increase restructurings and defaults.

CreditSights, Inc. said in a May report that Philippine banks are expected to underperform this year amidst slower lending growth and rising credit costs.

“Loan growth mostly decelerated in the first quarter as domestic sentiment remains impacted by the earlier graft scandal and further dampened by the Middle East conflict,” it said.

S&P Global Ratings Singapore Pte. Ltd. credit analyst Nikita Anand said bank profitability might weaken after the central bank suspended loan repayments for borrowers affected by higher energy prices.

“The move may undermine bank profitability as net interest margins peak and credit losses remain elevated,” she said.

Under the rules, affected borrowers may defer loan repayments for up to six months, whilst agricultural loans may be delayed for up to a year.

Questions to ponder:

1. Could prolonged oil price volatility weaken Philippine loan growth further?
2. Will repayment relief measures pressure bank profitability in 2026?
3. How do Philippine banks compare with regional peers in weathering oil-driven credit stress?