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The war in Iran has been raging for a month now, and the resulting energy crisis has hurt the world, as oil and gas prices surged in response to the closure of the Strait of Hormuz, through which about 20% of the world’s energy travels each year.
Much of Asia, as well as countries in the Pacific, have been badly affected, as many of them depend on Gulf shipments of oil and LNG (liquified natural gas) for electricity generation and transportation.
We’ve seen reports of petrol stations closing due to a lack of fuel, airlines cancelling flights, people forced to work from home to conserve energy and a threat of another wave of inflation fuelled by the rise in costs of moving goods.
Singapore was not spared the consequences, but the situation here is far better than in the worst-affected countries. With diversified sources of both oil and natural gas, as well as ample reserves, Singapore has little to fear other than higher-than-usual bills for filling up your car.
There’s no fear of blackouts, pumps running dry or businesses unable to carry out their operations. Electricity prices may not have jumped yet, but the government has the means to put a cap on them.
It’s mostly an inconvenience—and one which may even produce benefits for the country.
Everybody needs Singapore
Singapore is the world’s largest and most developed transhipment port.
Disruptions in other areas of the planet do not affect it directly, because no matter what happens, cargo has to travel through here to its destination.
If Hormuz cannot be used, then the endpoints may change in response to the closure. But Singapore is still the bridge between the West and the Far East. Shipping companies have already begun rerouting traffic to ports in Oman and the UAE, located on the coast of the Arabian Sea, with cargo then trucked overland to their final destination in the Middle East.
No matter where they are heading, though, their pit stop is still in Singapore.
And while higher prices may hurt the pockets of regular Singaporeans (although the government has already announced readiness to help), higher fuel and shipping costs make those companies operating here more profitable, with a share of their income ending up in the national budget through taxes.
In other words, not only is the trading activity unlikely to be meaningfully affected (just like it was not during the COVID-19 pandemic), but Singapore’s large shipping industry is probably going to benefit in many ways from the war-induced disruptions.
Money likes peace
An even more meaningful win for Singapore is the uncertainty that the war has introduced about the future of the developed and thus far very peaceful Gulf Arab countries.
For decades dependent on oil and gas, they have in recent years invested heavily to diversify their economies by appealing to wealthy immigrants.
It’s no secret that cities like Dubai or Abu Dhabi in the UAE (with Qatar and Saudi Arabia following in its footsteps) entered competition with Singapore to attract the richest people in the world, encouraging them to move to the Gulf and park their wealth there.
According to Henley & Partners, the UAE has been the leading destination for millionaires in the past decade. Just last year, nearly 10,000 of them, commanding US$63 billion in assets, moved to the Emirates, compared to only 1,600 and US$8.9 billion headed to Singapore.
Their offer has been quite appealing to many, since Arab nations don’t charge any income taxes, while other levies tend to be lower than in Singapore.
What’s more, they have far more land than the city-state and have been investing heavily in property development, building clean, modern cities offering some of the best living conditions in the world, at very competitive prices.
Their strategy, however, has always been underpinned by the promise of absolute safety, which the war with Iran has left a big crack in.
As missiles and drones target them every day, it has made some question their commitment to the Gulf, even if little damage is done.
Singapore, in comparison, is an oasis of calm, with a very robust military, in a region which doesn’t show any appetite for war—at least not one that would affect the city directly.
All of a sudden, the higher cost of living—the pricier apartments, the more expensive cars—feels worth the extra expense because it’s far less likely that a rogue neighbour is one day going to start bombing Singapore the way Dubai, for example, is.
Within a week, reports of anxious Asian residents trying to leave the Gulf hit the news headlines. They weren’t happy with the paradise bubble being popped so violently by the war they weren’t expecting to erupt.
The war may be bound to end within a few weeks or months at most, and it’s quite likely that a period of calm is going to follow it in the Middle East, but the damage done will take some time to fix.
Dubai, Abu Dhabi or Doha are not going to suddenly implode or become abandoned by panicked expats. Nevertheless, any future calculation made by the wealthy—especially those very rich—will include the potential for another military conflict.
This is where Singapore has gained a strong competitive advantage over its desert rivals.
Singapore thrives in crisis
The city does quite well at all times, of course, but when the international situation is peaceful, both companies and individuals are more open to taking risks.
It’s when a crisis strikes that everybody seeks to escape to a safe haven—such as Singapore.
During the pandemic, it was one of the critical logistical hubs, as cargo had to move even if people could not.
GDP per capita dipped slightly at first, to just over US$60,000, only to be catapulted by around 50% to over US$90,000 two years later, thanks to both how much Singapore’s economy has to offer and how trusted the Singapore dollar is.
It was similar after the 2008 financial crisis. A temporary and mild slowdown was followed by an economic surge.
Or last year, when Trump’s tariffs hit the world, Singapore’s economy recorded one of the highest growth rates in recent history. GDP jumped by 5% on increased trading activity amid global uncertainty as businesses were adapting to American actions.
Singapore is the essential trade node bridging Asia with the rest of the world. Economic crises don’t really freeze trade—they redirect it, and the reliable middleman always earns a premium for his services.
It’s no different this time.
- Read other articles we’ve written on Singapore’s current affairs here.
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