Amid escalating geopolitical tensions in the Middle East, especially the conflict between Iran and the United States, the world is watching closely.
If the situation escalates beyond military issues, it will inevitably cause major shocks to the "wallets" of people worldwide, including Thais.
As panic builds, the classic question in a crisis arises: What type of economic condition will emerge? Will goods become more expensive (inflation) or will the economy stagnate, causing prices to drop (deflation)?
Most importantly, should we keep as much cash as possible or convert money into other assets to hedge risks? Thairath Online will clarify this issue clearly.
Referring to the Middle East conflict context, economic experts are more concerned about "inflation" rather than deflation. This is mainly because the Middle East is the world’s key oil production and export region. If fighting breaks out or the Strait of Hormuz is blocked, global crude oil prices will surge sharply.
When oil prices rise, transportation and production costs for almost all goods increase accordingly. The result is that everyday items and consumer goods will rapidly become more expensive, while our incomes remain the same. This means the "value of the cash in our hands is declining." One hundred baht that once bought two plates of rice may now only buy one.
Deflation, characterized by unemployment and lack of purchasing power forcing businesses to cut prices to survive, could occur if the war prolongs and the global economy enters a severe recession. However, in the early stages of the energy crisis, inflation—or "high prices but no money to buy"—will be the first clear symptom.
Knowing that inflation is the main enemy in this situation, money management must balance "liquidity" and "value preservation." The following approaches are worth considering.
In times of crisis filled with uncertainty, liquidity is paramount. You still "must have" an emergency cash reserve in your account or on hand, enough to cover at least 3-6 months of expenses to cope with unexpected events like sudden unemployment or urgent financial needs. However, be cautious not to keep all your wealth in cash because inflation gradually erodes its value every day.
When war or political conflict arises worldwide, gold is often the first asset investors flock to for safety. Gold prices tend to rise inversely to stock market volatility. Holding some gold in your portfolio is therefore a good way to diversify risk and preserve wealth during war.
For those knowledgeable about investing, seeking opportunities in energy, oil, or commodity sectors is another way to hedge risks from rising oil prices.
In some cases, investors move funds into highly stable and globally liquid currencies, such as the US dollar. Even though the US is a conflicting party, the dollar often strengthens as a safe-haven asset during global crises.
Summary for Thais
With ongoing high uncertainty in tensions between Iran and the US, the best preparation is not panic selling or borrowing to hoard goods, but rather "organizing finances" wisely.
Start by ensuring your emergency cash reserve is sufficient for basic living expenses. Then, diversify the remaining savings into assets that can combat inflation, such as gold or mutual funds with risk hedging policies, so your wealth can safely weather the economic storm caused by this war.