Beyond the energy market alone

Speaking with VietNamNet, Nguyen Quang Huy, CEO of the Faculty of Finance and Banking at Nguyen Trai University, said geopolitical tensions in the Middle East are making global energy markets increasingly sensitive. Concerns are growing about potential supply disruptions and prolonged price volatility.

In this context, rising fuel prices are not only an issue for the energy sector. They can create ripple effects across inflation, production costs, transportation and the broader financial market.

According to Huy, fuel is a key input for most sectors of the economy, especially transportation, logistics, manufacturing and parts of agriculture. When fuel prices increase, the impact typically spreads through multiple layers of the economy.

The first and most direct impact is on transportation and logistics, sectors that rely heavily on fuel. When transportation costs rise, part of that pressure may be reflected in higher prices for goods.

However, in reality this cost transmission often occurs gradually. Many businesses attempt to share or absorb part of the increased costs in order to maintain competitiveness and stabilize consumer markets.

At the macroeconomic level, fluctuations in fuel prices can also place pressure on inflation. In the calculation of the Consumer Price Index (CPI), the transportation group accounts for a significant share. As a result, higher fuel prices may directly affect the CPI.

There is also an indirect ripple effect when higher production, transportation and distribution costs are gradually reflected in retail prices. The scale of the impact, however, depends on several factors such as domestic demand, price management policies and the adaptability of businesses.

Past experience shows that through flexible coordination of macroeconomic policies, Vietnam has often managed to keep the inflationary effects of energy price fluctuations within a reasonable range.

Huy also noted that fluctuations in global energy prices are often linked to inflation expectations and geopolitical risks, meaning they can influence financial market sentiment.

In the short term, the stock market, particularly the VN-Index, may react sensitively if companies face rising input costs or if investors adjust expectations about interest rates and economic prospects.

However, the impact of energy prices on the market is not entirely negative. In periods of rising oil prices, some companies within the oil and gas value chain and energy sector may benefit from improved commodity prices.

In international markets, oil benchmarks such as Brent and WTI typically reflect global supply and demand expectations as well as geopolitical risks in major producing regions.

Preparing proactive response scenarios

According to Huy, in an unpredictable energy market environment, building response scenarios is essential to avoid being caught off guard.

The first scenario involves a sharp and prolonged increase in oil prices due to escalating geopolitical tensions that disrupt global supply. In such a case, energy costs could remain elevated for a long period, placing significant pressure on production and transportation expenses.

The second scenario assumes oil prices rise but remain within manageable limits because global supply is not severely disrupted. Under this scenario, the economy could adapt through cost adjustments and improved operational efficiency.

The third scenario envisions only a short term price increase driven mainly by market sentiment, after which prices gradually stabilize as supply and demand regain balance.

Preparing such scenarios allows policymakers and businesses to proactively implement solutions for both short term and long term challenges.

Strengthening economic resilience

Huy said fluctuations in global energy markets highlight the urgent need to strengthen the internal resilience of the economy.

First, Vietnam needs to continue diversifying its energy supply sources to reduce dependence on a limited number of markets. Expanding supply sources and diversifying import partners would help the economy remain flexible when international markets fluctuate.

At the same time, it is important to improve domestic refining and processing capacity using crude oil extracted within the country. Greater autonomy in refining could strengthen the resilience of the energy supply chain and reduce reliance on imported petroleum products.

Another important direction is accelerating the green transition and developing renewable energy sources. Investment in wind power, solar energy and clean energy technologies can reduce dependence on fossil fuels while aligning with the global energy transition.

In parallel, policies should encourage the development of renewable energy equipment and products while promoting energy conservation and improving energy efficiency in both production and daily life.

According to Huy, these measures would not only reduce pressure from fluctuating fuel prices but also create a foundation for sustainable long term economic growth.

In a context where energy costs may fluctuate unpredictably, he said businesses must also develop adaptive strategies.

One key step is improving energy efficiency through technological upgrades, optimized production processes and reduced fuel consumption. This is a sustainable approach that can lower costs while enhancing competitiveness.

Businesses may also restructure supply chains and logistics operations, selecting more efficient transportation methods to reduce dependence on fuel costs.

In addition, building flexible financial scenarios and strengthening risk management for input costs can help companies maintain operational stability during periods of market volatility.

Nguyen Le