UOB Global Economics & Markets Research, through deputy economist Jester Koh, estimates that Singapore’s GDP exposure to the Middle East conflict is modest under a short-term shock scenario. Exports to key regional economies account for around 2% of total exports, and UOB maintains its 2026 GDP growth forecast of 3.6%, while flagging potential secondary demand impacts in the form of weaker global consumption and investment.
The impact on growth is currently perceived as narrow
“We estimate that the direct impact on Singapore’s GDP growth from the latest escalation of conflict in the Middle East will be limited at this stage, assuming that the conflict will only escalate for a short period (within four weeks) and that the associated oil price shock will be transient (staying below $100 per barrel and then gradually normalizing).
“Secondary effects on growth, while difficult to quantify, may arise from the associated suppression of consumption and investment activity in Singapore’s key trading partners.”
“External demand may be weakened by weaker sentiment and supply chain disruptions, which in turn will impact Singapore’s exports. This represents a drag on Singapore’s growth, compounded by the high degree of openness of the economy, with a significant share of domestic value added (DVA) supported by overseas demand.”
“In addition, the spillover effects of higher utility, transportation and input costs on inflation in both goods and services could be significant. Our regression results using data from 2005 to 2025 suggest that a $10 per barrel increase in Brent crude oil prices over the baseline could raise core inflation by approximately 30 to 40 basis points.”
“On balance, this means, ceteris paribus, that there is a greater likelihood that MAS will tighten policy at the April 2026 MPS (our base case), raising the slope of the S$NEER band by 50 basis points to 1.0% per year, although there is a possibility that policy normalization could be delayed until the July 2026 MPS.”
“We estimate that the macro impact of the ongoing conflict in the Middle East is likely to be more pronounced on inflation than on growth, at least in the near term.”
(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)
