Disclaimer: Unless otherwise stated, any opinions expressed below are solely the author’s.
The war in Iran has been going on for a month, and the resulting energy crisis has hurt the world, as oil and gas prices have risen due to the closure of the Strait of Hormuz, through which about 20 percent of the world’s energy passes each year.
Much of Asia, as well as countries in the Pacific, have been badly affected, as many of them depend on Gulf oil exports and LNG (liquefied natural gas) for electricity generation and transportation.
We have already seen reports of gas stations closing due to fuel shortages, airlines canceling flights, people being forced to work from home to conserve electricity and the threat of another wave of inflation fueled by rising freight costs.
Singapore was not spared the consequences, but the situation here is much better than in the worst affected countries. With various sources of both oil and natural gas, and a number of wells, Singapore has nothing to fear other than higher-than-usual car fuel bills.
There is no fear of power outages, dry pumps or businesses not being able to do their jobs. Electricity prices may not have gone up yet, but the government has the power to shut them down.
It’s often a distraction—and one that can produce benefits for the country as well.
Everyone needs Singapore
Singapore is the largest and most developed port in the world.
Disturbances in other parts of the world do not directly affect us, because no matter what happens, the goods must pass from here to where they are going.
If Hormuz can’t be used, then the end points can change in response to the shutdown. But Singapore is still a bridge between the West and the Far East. Shipping companies have already started to reroute traffic to ports in Oman and the UAE, on the Arabian Sea coast, with cargo then trucked to its final destination in the Middle East.
However, no matter where they are headed, their pit stop is Singapore.
And although high prices may hurt the wallets of ordinary Singaporeans (although the government has already announced its readiness to help), the high cost of fuel and transport makes those companies operating here more profitable, part of their income ends up going to the national budget through taxes.
In other words, not only is commercial activity unlikely to be meaningfully affected (as it was during the COVID-19 crisis), but Singapore’s shipping industry is likely to benefit in many ways from the disruption caused by the war.
Money likes peace
An even more meaningful achievement for Singapore is the uncertainty that the war has cast over the future of the developed and so far relatively peaceful Gulf Arab states.
Dependent on oil and gas for decades, in recent years they have invested heavily in diversifying their economy by appealing to wealthy expatriates.
It is no secret that cities like Dubai or Abu Dhabi in the UAE (with Qatar and Saudi Arabia following in their footsteps) compete with Singapore to attract the world’s richest people, encouraging them to move to the Gulf and park their wealth there.
According to Henley & Partners, the UAE has been a top destination for billionaires for the past decade. Last year alone, nearly 10,000 of them, worth US$63 billion in goods, moved to the Emirates, compared to only 1,600 and US$8.9 billion to Singapore.
Their offer has attracted many, as Arab nations do not charge any income tax, while other taxes are often lower than in Singapore.
In addition, they have much more land than the city municipality and have been investing heavily in infrastructure development, creating clean, modern cities that offer the best living conditions in the world, at very competitive prices.
Their strategy, however, has always been underpinned by the promise of absolute security, which the war with Iran has left a big rift in.
With missiles and drones targeting them daily, it has made some question their commitment to the Gulf, even if little damage is done.
Singapore, by comparison, is a place of peace, with a strong military, in an area that shows no desire for war—at least not one that would directly affect the city.
Suddenly, the high cost of living—expensive apartments, expensive cars—feels worth the extra expense because it’s very unlikely that a violent neighbor will one day start bombing Singapore the way Dubai, for example, has.
Within a week, reports of worried Asian citizens trying to get out of the Gulf made headlines. They were not happy with the bubble of paradise that had burst violently because of the war they did not expect.
The war may end within weeks or months at most, and a period of calm may follow in the Middle East, but the damage done will take time to repair.
Dubai, Abu Dhabi or Doha will not suddenly explode or be abandoned by panicked exits. Still, any future calculations by the rich—especially the very rich—will include the possibility of another military conflict.
This is where Singapore has gained a strong competitive advantage over its desert rivals.
Singapore thrives on adversity
The city always does well, of course, but when the international situation is calm, both companies and individuals are more open to taking risks.
It is when disaster strikes that everyone wants to flee to a safe place—like Singapore.
During the violence, it was one of the most critical places, as the luggage had to go even if the people couldn’t.
GDP per capita fell slightly at first, to just over US$60,000, and recovered by about 50% to over US$90,000 two years later, due to both how much Singapore’s economy has to offer and how reliable the Singapore dollar is.
It was the same after the 2008 financial crisis. A temporary and minor downturn was followed by an economic boom.
Even last year, when Trump’s tariffs hit the ground running, Singapore’s economy recorded one of the highest growth rates in recent history. GDP jumped 5% on trade growth amid global uncertainty as businesses adjusted to US actions.
Singapore is an important trading hub connecting Asia and the rest of the world. Economic problems don’t necessarily stop trade—they redirect it, and a reliable middle man always earns a fee for his services.
This is no different.
- Read other articles we have written on Singapore current affairs here.
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