UOB Global Economics & Markets Research, represented by Associate Economist Jester Koh, has evaluated Singapore's GDP exposure to the ongoing Middle East conflict and concluded that the direct impact on growth is limited, provided the conflict remains short-lived (within four weeks) and the oil price shock is transient, staying below US$100 per barrel and normalizing gradually thereafter [1]. Singapore's exports to key regional economies affected by the conflict constitute about 2% of total exports, indicating modest direct exposure [1]. UOB maintains its 2026 GDP growth forecast at 3.6% despite the current situation [1].
The report highlights potential secondary effects, such as a drag on consumption and investment activity in Singapore's key trading partners, which could dampen external demand and weigh on Singapore's exports due to weaker sentiment and supply-chain disruptions [1]. The economy's high degree of openness, with a significant share of domestic value-added supported by foreign demand, compounds these risks [1].
Inflationary pressures are expected to be more pronounced than growth impacts in the near term. UOB's regression analysis, using data from 2005–2025, suggests that a US$10 per barrel increase in Brent crude oil prices from baseline could raise core inflation by around 30–40 basis points [1]. Spillover effects from higher utility, transport, and input costs could be meaningful for both goods and services inflation [1].
Looking ahead, UOB anticipates a higher likelihood that the Monetary Authority of Singapore (MAS) will tighten policy at the April 2026 Monetary Policy Statement (MPS) by raising the S$NEER band slope by 50 basis points to 1.0% per annum, although there is a possibility that policy normalization could be delayed to the July 2026 MPS [1].
CONCLUSION
UOB assesses that Singapore's growth impact from the Middle East conflict is limited for now, with more significant effects likely on inflation. The 2026 GDP growth forecast remains unchanged at 3.6%, but inflationary pressures could prompt MAS to tighten policy in April 2026. Overall, the market impact is expected to be low unless the conflict or oil price shock persists.