SINGAPORE (The Straits Times/ANN): Singapore may face the burden of higher prices if the conflict in the Middle East continues for long, said Deputy Prime Minister Gan Kim Yong.
Speaking in Parliament on March 2, DPM Gan said geopolitical conflicts will significantly impact a small and open economy like Singapore.
He noted that the Strait of Hormuz, a key shipping route for crude oil and liquefied natural gas (LNG), has been closed after the US and Israel launched an attack on Iran, and Iran retaliated by counter-attacking Israel and US bases in the region.
“In the near-term, this could result in an increase in global energy prices,” he said.
“Depending on how protracted the conflict is, higher energy prices could lead to higher costs for businesses and consumers, and weigh on the global and Singapore economies.”
DPM Gan, who is also Minister for Trade and Industry, said Singapore is monitoring developments closely and will reassess its gross domestic product and inflation forecasts if necessary.
Singapore in January upgraded its full-year 2026 growth forecast to a range of 2 per cent to 4 per cent, with the economy projected to continue benefiting from a sustained global artificial intelligence investment boom.
The growth outlook was raised from an earlier range of 1 per cent to 3 per cent, after the economy grew much faster than expected in the final quarter of 2025.
DPM Gan said in Parliament on March 2 that tariffs continue to cast a shadow on Singapore’s economic outlook.
“Not just the direct tariffs between Singapore and the US... but what is even more important is the environment under which we are now operating, where tariffs can be adjusted at will and with very short notice,” he said.
The Monetary Authority of Singapore (MAS) said on March 2 that it is also assessing the impact on the domestic economy and financial system.
MAS confirmed that Singapore’s foreign exchange and money markets continue to function normally, while the Singapore dollar nominal effective exchange rate (S$Neer) – the trade-weighted currency – remains within its appreciating policy band, which will continue to dampen imported inflationary pressures.
The central bank is in an appropriate position to respond, if necessary, to risks to medium-term price stability, it added.
The central bank had forecast both core inflation and all-items inflation to average 1 per cent to 2 per cent in 2026.
DPM Gan, responding to a question by Mr Saktiandi Supaat (Bishan-Toa Payoh GRC), said the continuing uncertainty over US tariffs can also have a significant impact on Singapore’s economy.
“Not just the direct tariffs between Singapore and the US... but what is even more important is the environment under which we are now operating, where tariffs can be adjusted at will and with very short notice,” he said.
He said there are many measures in Budget 2026 to strengthen Singapore’s economic resilience against the impact of tariffs on growth and investment.
Brent crude, a key global benchmark for oil prices, surged as high as US$82.37 per barrel in early trade, the highest since January 2025. It pulled back a tad to trade at US$79.86 – still 9.5 per cent higher than the close on Feb 27 and up about 30 per cent since the start of 2026.
Rallying crude prices reflect the market’s concern about supplies coming through the Strait of Hormuz – a narrow waterway connecting the Persian Gulf to the Indian Ocean that handles a fifth of the world’s oil and large volumes of liquefied natural gas (LNG).
Some 15 million barrels of crude oil and 290 million cubic m of LNG pass through the strait each day from the Middle East to mainly Asia and Europe.
Analysts said tanker traffic through the strait has largely halted, with a self-imposed pause since the conflict began on Feb 28 as insurers warned ship owners that they would cancel policies and raise coverage prices for the region.
DPM Gan also said in Parliament on March 2 that Singapore receives significant supplies from the Middle East.
However, there are measures Singapore can take to protect itself against potential external shocks in energy supply.
“Some of these we won’t be able to share because they are confidential and security-related,” he said. -- The Straits Times/ANN
