MUFG said a prolonged Iran conflict and an extended closure of the Strait of Hormuz could lift USD\/VND above 27,000 in 2026. Its base case forecasts are 26,300 by March 2026 and 26,600 by December 2026.<\/p>\n
The scenario for USD\/VND above 27,000 assumes Brent crude is around US$100\/bbl. The base case assumes de-escalation after March 2026 and oil prices easing back towards pre-conflict levels over time.<\/p>\n
In a downside scenario, MUFG set out USD\/VND at 27,700 or higher if oil holds at US$120\/bbl and energy shortages occur. The report linked the currency move to energy shocks and stagflation risks.<\/p>\n
MUFG described Vietnam as less exposed than India and the Philippines within Asia ex-Japan. It also said energy shortages could still affect Vietnam through weaker manufacturing activity and slower global growth.<\/p>\n
With Brent crude futures holding firm above $105 per barrel, the base case scenario for USD\/VND is already under pressure. The spot rate has breached the 26,500 level this week, far exceeding the expected 26,300 for the end of this month. We believe this reflects a market pricing in prolonged conflict in the Middle East, making a simple de-escalation seem unlikely.<\/p>\n
In the coming weeks, we should consider strategies that benefit from a rising USD\/VND exchange rate and increased volatility. This includes looking at USD call options or VND put options with strike prices around 27,000 for the second quarter. Non-deliverable forwards (NDFs) also offer a way to lock in a favorable rate now, anticipating further dong weakness.<\/p>\n
This situation feels similar to the pressures we saw back in 2022 when the conflict in Ukraine began and energy prices soared. Vietnam’s February import data already showed a 15% year-on-year jump in its energy bill, and headline inflation has ticked up to 4.8%. While Vietnam is more resilient than its peers, this stagflationary pressure will weigh on the currency.<\/p>\n
The key tail risk to monitor is a full closure of the Strait of Hormuz, which could push oil towards the $120 per barrel mark. In that scenario, a move toward 27,700 for USD\/VND becomes highly probable. We should model these outcomes as the risk of a sustained energy shock appears to be growing.<\/p>\n
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