<div id="readability-page-1"><div>SINGAPORE - The energy shock from the Iran War will cascade down the Singapore economy in direct and indirect ways - with businesses in construction, real estate and food &amp; beverage (F&amp;B) among those also likely to face higher costs, on top of transport operators.The bunkering industry, which underpins Singapore as the world’s biggest refuelling port, is already feeling the impact, according to the Republic’s central bank on April 14.Overall, a prolonged disruption to global energy supplies poses risks of higher inflation and weaker growth in Singapore, and moderate demand for labour and wage growth, said the Monetary Authority of Singapore (MAS) in its latest macroeconomic review.The report came after MAS tightened its monetary policy stance for the first time since 2022, to allow for a stronger currency in the face of soaring oil and natural gas prices.It also raised its all-items and core inflation forecasts for 2026 to an average of 1.5 per cent to 2.5 per cent, up from an earlier projection of 1 per cent to 2 per cent.Global oil and natural gas prices have surged since Feb 28 when the United States and Israel launched an air campaign against Iran. The Islamic republic in turn has effectively blocked the Straits of Hormuz that in peace time allowed flow of a fifth of global oil and natural gas supplies from the Persian Gulf.There is significant uncertainty on how long the conflict would persist and keep flow of oil, natural gas and other inputs and commodities from the region constrained. But the disruption to supplies and maritime trade routes could result in a near-term negative impact on the Singapore economy, said the MAS in its report. Sectors in Singapore which depend most heavily on energy supplies will, therefore, likely to be directly affected, it noted. Top energy-dependent industries here include petroleum; gas and electricity; petrochemicals; transportation services for land, air and sea; as well as water and waste services.First, their production volumes may be affected. Second, higher production costs would squeeze profit margins and discourage investment, which in turn could result in these industries passing down the costs to consumers. This would erode household real incomes and dampen aggregate demand, said the MAS. The impact from disruptions to critical imported raw materials have so far been concentrated in the chemicals industries, evidenced by a wave of force majeure declarations across Asia, including Singapore.Indirectly affected sectors will include wholesale trade, which comprise 19 per cent of the country’s GDP, as these businesses depend on transport services.MAS noted that about half of the sector’s resource requirements stem from the energy-intensive transport and storage sector, particularly water transport services.“Indeed, effects on the wholesale trade sector appear to have already materialised, especially for oil bunkering services,” said the MAS. Bunker prices reached historic highs in March 2026, as suppliers rationed inventory, declined new contracts, and extended lead times to prioritise existing obligations, it added. “Although bunkering only accounts for 5 per cent of Singapore’s total exports, it anchors a critical economic cluster comprising marine insurance, ship finance, commodity trading, legal and arbitration services, and port operations.”Finally, the domestic-oriented sectors would likely experience mounting cost pressures and operational challenges from disruptions in upstream supplies.MAS said most directly impacted would be the land transport operators who are confronted with significant hikes to petrol and diesel prices.Recent anecdotal reports have also pointed to rising petroleum-based material costs in construction, while food and beverage operators could face higher utility, plastic packaging and raw material costs.“Overall, risks to growth are tilted to the downside, particularly if the fallout of the energy crisis becomes prolonged,” said the MAS. The latest advance estimates for January to March released on April 14 by the Ministry of Trade and Industry showed the economy contracted by a seasonally-adjusted 0.3 per cent on a quarterly basis. That was after Singapore’s GDP expanded by 1.3 per cent in the preceding quarter.MAS said the quarterly slowdown reflected some normalisation in the trade-related and modern services clusters - such as legal, accounting, digital banking and computing services - following their strong performance late last year. The economy remained firm on a yearly basis, growing at 4.6 per cent, showing that sectoral growth drivers were relatively unchanged, led by the technology-related segments within the trade-related and modern services clusters.Still, most analysts believe MTI’s 2 per cent to 4 per cent forecast for 2026 gross domestic product (GDP) growth will be lowered next monthWhile inflation is already showing up in energy prices and some other inputs, the impact on growth will come with a lag, according to the MAS report. For now, high-frequency indicators suggest that activity in the external-oriented sectors remained broadly intact, even after the onset of the Middle East conflict.Singapore’s labour market, which showed signs of strength in the second half of 2025, might also suffer some fallout from the Middle East conflict.MAS said: “Amid growing uncertainties, firms could turn more cautious in their headcount expansion this year.”The Singapore Commercial Credit Bureau Business Optimism Index survey for Q2 2026, conducted amid the outbreak of the Middle East conflict, also indicated a slight moderation in overall business outlook.“With the anticipated slowing of the economy, employment growth is expected to ease from the gains in 2025, with non-resident employment growth adjusting in tandem,” said the MAS.However, labour demand continues to be structurally strong in sectors such as health and social services, public administration and education. Further, there remains unfilled vacancies for skilled workers in technology and engineering-related roles, amid rapid technological developments.While nominal resident wage growth is projected to moderate, policy-driven wage adjustments such as through the Progressive Wage Model, as well as upcoming pay increases for groups such as educators, should provide some support.“However, a prolonged or deeper- than-expected economic slowdown could lead to a more substantial scaling back of hiring plans as well as an uptick in retrenchments,” said MAS.</div></div>

The ongoing Iran War is expected to significantly impact Singapore's economy, particularly in sectors like construction, real estate, and food & beverage, due to rising energy costs. The Monetary Authority of Singapore (MAS) warns of higher inflation and weaker growth, adjusting its inflation forecasts for 2026. The bunkering industry is already feeling the strain, with historic price highs and supply disruptions. Overall, the MAS indicates that prolonged energy supply disruptions could lead to decreased production, squeezed profit margins, and increased costs for consumers, affecting aggregate demand and economic growth.

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Energy shock from Iran war to hit S’pore sectors like property and F&B; bunkering already affected