The Philippines has long had a problem with Islamic terrorism. Indeed, the military conflict in the country’s south between the national government and various Islamic factions has the distinction of being the second oldest ongoing military conflict in the world after that of North and South Sudan.

But now it seems that the Philippines is going to have a problem with ISIS, and that should cause chills, even if the country has become used to conducting business as usual in the face of widespread death and population displacement in the south thanks to the long running conflict.

At the moment, there is an ongoing military crisis in Marawi City in Mindanao, one of the most populous Muslim cities in the south of the Philippines, where Maute fighters, who have pledged loyalty to ISIS, are holed up in the face of surgical air strikes from Philippines government forces.

There is bombing and fighting, and most of the city’s 200,000 residents have fled. Philippines soldiers have died in the conflict, as have rebels, some of whom have entered the Philippines to fight for the Maute from as far away as Singapore and Indonesia.

The action was precipitated by a raid on the hideout of the magnificently named Isnilon Hapilon, a commander of Islamist group the Abu Sayyaf, which has also pledged allegiance to ISIS. Philippines President Rodrigo Duterte has declared martial law in Mindanao as a result of the ongoing standoff in Marawi.

So much for background, but what comes next? I suspect, much as I have in this column for almost a year since Duterte was elected, that the next stage will be the declaration of martial law across the Philippines.

A few bombs in Manila or another big city further north such as Cebu or IloIlo would be enough to get the president to act. To clarify, I have believed since his election that the autocratic Duterte planned martial law from day one – it’s just that recent events have played into his hands.

I assume that when martial law is declared nationwide it will be very much business as usual, and I suspect that the peso, stocks and bonds will all rally, such is the typical market reaction these days to reactionary political initiatives.

Longer term, the question will be how the country’s political establishment responds to a concept which raises the spectre of the Marcos dictatorship and which elicits deep-seated passion in those who experienced martial law, including leading political figures such as former president Fidel Ramos, who helped end it.

Martial law or no, the reality is that the Philippines is primed to play host to ISIS, once the humiliation of its defeat in the caliphates of Syria and Iraq have played out. The ISIS leadership have said as much, and suggested to wannabe ISIS fighters who missed out on the potential glories of Syria or Iraq that the Philippines should be their next port of call.

That presents Duterte’s government with as big an immigration problem as confronts Angela Merkel or Theresa May when it comes to a terrorist threat. Duterte is no doubt aware of the scale of the threat posed by ISIS in his country. He could go for a scorched earth approach, but it seems to me that the threat is not going to go away. I would be lightening up my Philippines portfolio holdings in the long run, perhaps catching any post martial law rally as an ideal time to dump some paper.