Carlos Cid Álvares
Escalating U.S.-Iran tensions are raising fears of oil supply disruptions that could squeeze Macau’s gaming and tourism sectors, local experts warn.
Carlos Cid Álvares, executive vice president and CEO of Banco Nacional Ultramarino in Macau, called the situation a “complex web of challenges” for the city’s open economy.
“For a highly open economy like Macau, the scenario of escalating U.S.-Iran tensions leading to a protracted oil crisis presents a complex web of challenges,” he told the Times.
Meanwhile, Henry Lei, an associate professor of business economics at the Faculty of Business Administration at the University of Macau (UM), said that delayed U.S. interest rate cuts are “impacting Macau indirectly through our costs of borrowing and investment incentives, probably affecting the recovery process of our property market and the business environment of SMEs.”
Their comments came Tuesday as Brent crude reached USD84 a barrel, the highest level since July 2024, extending an over 6% gain from the previous session, with gold holding above $5,300 an ounce.
Currency and oil buffers
Since Monday, investors have flocked to the US dollar as a safe haven. Álvares noted Macau’s pataca peg to the Hong Kong dollar and US dollar offers stability, even as it cuts both ways. “The Macanese pataca (MOP) automatically appreciates in line with the greenback,” he said, making non-dollar imports cheaper but providing scant protection against pricier dollar-denominated oil and gold.
Henry Lei
On the other hand, the outlook for the renminbi was described as “more nuanced.”
The BNU CEO explained that while a strong USD typically puts depreciation pressure on the RMB, China’s unique position as the world’s largest oil importer and its strategic stockpiling efforts may provide a buffer. He said, “Analysts suggest that China’s vast commercial and strategic petroleum reserves, built up throughout 2025, are a key defense against imported inflation.”
“These stockpiles, estimated to cover 140–150 days of imports, allow China to moderate its spot market purchases when prices spike, potentially reducing the need for a sharp currency depreciation to balance the trade ledger.”
“This stability in the RMB is critical for Macau, given its deep economic integration with the mainland,” Álvares noted. He added that Macau relies wholly on imported energy, mainly from mainland China, a major buyer of Middle Eastern crude.
Iran has not officially closed the Strait of Hormuz and says it has no intention of doing so, but shipping through the narrow waterway has largely stalled, with insurers reportedly withdrawing war-risk coverage for vessels entering the Persian Gulf.
A Strait of Hormuz closure would block about 20% of global oil trade, including much of China’s supply, posing serious supply chain risks.
“While mainland China has strategic reserves to cushion the blow for its own refineries and economy, a prolonged and severe disruption would inevitably lead to higher costs and potential supply tightening for energy products flowing into Macau, impacting electricity generation and transport fuels,” he said.
However, Álvares views a full, prolonged Hormuz shutdown as a high-impact “tail risk” rather than a likely scenario.
Such an oil crisis could slow China’s GDP via steeper fuel and logistics costs. Yet the BNU CEO noted potential upsides, saying Macau “is positioned as a safe, high-quality, and easily accessible destination within China that could see it capture a larger share of regional travel spending” if long-haul trips to Europe or the U.S. falter.
Álvares outlined two scenarios. A short one- to four-week disruption would spark brief inflation and market jitters, cushioned by China’s reserves with minimal effect on tourists. But a one- to six-month disruption might drain stockpiles, force costlier purchases, raise Macau’s energy bills, and erode premium gaming revenue as mainland confidence fades.
However, he warned, “The most immediate and tangible impact on Macau residents would be through inflation, particularly given the territory’s heavy reliance on imported goods.”
Inflation and consumer squeeze
The territory already pays more for fuel than neighboring Zhuhai, inflating prices for imported food, household goods, and services.
“An external shock would exacerbate this, leading to higher costs for food, household goods, and services,” he said.
That erosion of purchasing power could sap consumer confidence and squeeze the community economy that supports small and medium-sized enterprises outside the casinos.
Lei, program coordinator for the UM’s MSc in Data Science with a financial technology focus, told the Times, “I speculate that the inflation rate is going to stay at a relatively low level in 2026, given the recent international geopolitical conflicts and uncertainties, intensified by the volatile financial market performance.”
According to Lei, energy price hikes should remain manageable at 5–8% of household spending, or 16% including transport, though they would exert “certain pressure on the public.”
Travel chaos
Macau’s Government Tourism Office reported 16 hotline inquiries from March 1-3 related to these issues in the Middle East. Shutdowns at hubs like Dubai, Abu Dhabi, and Doha – as well as partial closures in Qatar, Bahrain, Kuwait, and the UAE – have paralyzed flights and stranded passengers.
About 70% of the affected residents were stuck in or rerouting from Dubai, Abu Dhabi, and Bahrain; the rest sought tour group cancellations.
Globally, airline stocks plunged 4-10%, with Qantas down 10%, Air France 9.4%, and Lufthansa down 5-6%.
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