MUFG’s Senior Currency Analyst Michael Wan warns that prolonged conflict in Iran and a sustained Strait of Hormuz closure could push USD/VND above 27,000 in 2026, versus a base case of 26,300 by March and 26,600 by December. The bank highlights Vietnam’s relative resilience in Asia but still expects a weaker Vietnam Dong as energy-driven stagflation pressures build.

Dong seen weaker on energy shock

"We think USD/VND will likely rise above the 27,000 levels if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with Brent oil prices trading around US$100/bbl at the time of our writing: While we do not yet know how the Iran and Middle East conflict will play out from here, it’s important to stress our current base case USD/VND forecast of 26,300 by Mar 2026 and 26,600 by Dec 2026 assumes a de-escalation after March 2026 and implicitly for oil prices to fall towards pre-Iran conflict levels over time."

"In a left tail risk scenario if oil sustains at US$120/bbl coupled with meaningful energy shortages, we think USD/VND at 27,700 or even higher will look achievable."

"Ultimately, we see Vietnam as less vulnerable relative to the likes of India and the Philippines within an Asia-ex-Japan context, but in a left tail risk scenario of meaningful energy shortages the indirect negative spillover impact to sectors such as manufacturing and global growth will likely weigh on Vietnam as well."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)