SM Lee Hsien Loong on Tensions in Middle East Affecting Energy Prices
•February 28, 2026
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Why It Matters
Higher oil and gas prices will strain Singapore's cost‑sensitive economy and could ripple through Asian supply chains, prompting urgent policy responses. The situation highlights the vulnerability of import‑dependent economies to geopolitical shocks.
Key Takeaways
- •Israel-US strike on Iran escalated regional conflict
- •Conflict expected to tighten global oil supply
- •Singapore's energy costs likely to rise
- •Uncertainty may affect Asian manufacturing competitiveness
- •Diversification of energy sources becomes strategic priority
Pulse Analysis
The recent joint Israeli‑American operation against Iran marks a sharp escalation in a region already fraught with tension. Analysts expect the ensuing retaliation to constrict oil output from the Persian Gulf, a key artery for global supply. Even before any formal embargoes, market participants are pricing in heightened risk premiums, nudging Brent and WTI futures upward. This volatility is not confined to the Middle East; it reverberates through futures markets, shipping routes, and the broader energy‑security calculus of nations worldwide.
Singapore, a small open economy, imports roughly 95% of its primary energy needs, chiefly from the Middle East and Southeast Asia. A sustained rise in crude prices would directly inflate electricity, transport, and manufacturing costs, eroding the city‑state’s competitive edge. The government has already signaled a push toward natural‑gas diversification and renewable integration, but short‑term exposure remains significant. Companies may face tighter margins, prompting a reassessment of pricing strategies and supply‑chain resilience, while policymakers could accelerate strategic petroleum reserve builds or explore bilateral fuel agreements.
Regionally, the conflict underscores the strategic imperative for Asian economies to reduce reliance on volatile oil corridors. Investors are watching for shifts toward alternative energy sources, such as liquefied natural gas from the United States or increased solar capacity in the Indo‑Pacific. Moreover, the heightened geopolitical risk may spur financial markets to price in higher country‑risk premiums for energy‑linked assets. For businesses and investors alike, staying ahead of policy adjustments and market signals will be crucial in navigating the uncertain energy landscape ahead.
Original Description
The tensions in the Middle East will affect energy prices and impact countries far away, such as Singapore, Senior Minister Lee Hsien Loong said on Saturday (Feb 28).
“Today, Israel and the US together attacked Iran, jointly. The war has begun, Iran has struck back," he said, adding that it would be hard to tell how the war would end.
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