The Philippine peso weakened sharply against the US dollar on Thursday as prospects for a peace agreement between the United States and Iran dimmed, with both sides remaining at an impasse.

The currency lost 16.3 centavos to close at P61.343 per dollar, down from its P61.18 finish on Wednesday, according to data from the Bankers Association of the Philippines' website. It was the peso's weakest closing level in two weeks, since settling at P61.56 on July 30.

The local unit opened Thursday's session slightly lower at P61.20 against the dollar. It traded to an intraday high of P61.18 and a low of P61.44. Dollar volumes climbed to $1.7 billion from $1.46 billion in the previous session.

A trader, speaking by phone, attributed the peso's slide to US consumer inflation data that landed within market expectations, prompting a correction in the dollar against a backdrop of persistent Middle East uncertainty and elevated oil prices. As a net energy importer, the Philippines is particularly exposed to sustained increases in global crude costs, which widen the country's import bill and can feed through to domestic inflation.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the currency also mirrored weakness in the Philippine stock market, with investor sentiment subdued amid economic growth risks and ahead of the Chinese "ghost month," a period typically associated with thin trading activity.

The Philippine Stock Exchange index declined 1.23%, or 78.39 points, to finish at 6,288.25 on Thursday. The broader all-shares index slipped 0.77%, or 26.76 points, to 3,437.23.

Philippine gross domestic product (GDP) growth slowed to 2.3% in the second quarter, down from 5.4% in the same period a year earlier and 2.8% in the preceding quarter. The figure marked the slowest expansion since the fourth quarter of 2009, excluding the pandemic period. First-semester GDP growth averaged 2.6%, falling below the government's full-year target range of 3.5%–4.5%. The sharp deceleration adds to pressure on the peso, as slower growth can dampen foreign portfolio inflows and investor appetite for emerging-market assets.

For Friday, the trader forecast the peso trading between P61.10 and P61.50 against the dollar, while Mr. Ricafort projected a range of P61.25 to P61.45.

Iran and the United States remain deadlocked in efforts to reach a permanent end to the Gulf war, according to a senior Iranian source who said there had been no progress in negotiations to revive the interim deal reached in June and to establish a timeline for its implementation, Reuters reported.

The remarks followed fresh criticism from US President Donald J. Trump directed at Iran's leadership, further dimming hopes for a resolution to the crisis in the wake of new attacks on regional shipping on Tuesday.

The June agreement had declared an "immediate and permanent termination of military operations on all fronts," but it quickly frayed. Mr. Trump declared the deal "over" on July 7, and Iran's foreign ministry announced it was "suspended" a week later.

Washington accuses Tehran of failing to uphold its commitment under the deal to reopen the strategically vital Strait of Hormuz shipping route, through which roughly a fifth of global oil supplies normally transit. Iran counters that the US has failed to meet its own obligations, including lifting a blockade on Iranian ports and releasing frozen Iranian assets.

Mr. Trump stated on Wednesday that the US maintains "total control" over the Strait of Hormuz. However, the Persian Gulf Strait Authority — the body Iran established to manage the waterway — said the strait remains blocked and will not be reopened until Iran's conditions are met.

Benchmark Brent crude futures have surged since the war began in February, reaching a peak of $126 per barrel, approximately 75% above prewar levels. Volatile trading has reflected persistent concerns over disruptions to Gulf oil supplies and shifting signals regarding peace negotiations.

Oil prices rose before stabilizing in volatile trading on Wednesday, after forecasters reduced their projections for 2026 oil demand. Brent crude futures traded at around $88 a barrel, while US West Texas Intermediate crude stood at approximately $83 a barrel.

— Aaron Michael C. Sy with Reuters