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Singapore Warns of Economic Impact from Potential Israel-US Strike on Iran

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  Published in Stocks and Investing on Sunday, March 1st 2026 at 17:05 GMT by The Straits Times
      Locales: SINGAPORE, UNITED STATES, ISRAEL, IRAN (ISLAMIC REPUBLIC OF)

Singapore, March 1st, 2026 - Prime Minister Lee Hsien Loong has cautioned that a potential military strike on Iran by Israel and the United States poses a significant threat to global energy markets and, consequently, to Singapore's economy. Speaking at the Fullerton Lecture on February 24th, 2026, PM Lee underscored the precariousness of the situation in the Middle East and the far-reaching implications of a military escalation.

"The situation in the Middle East is deeply concerning," PM Lee stated. "An Israel-US attack on Iran would inevitably disrupt energy prices and ripple outwards, impacting even nations geographically distant like Singapore." This statement reflects growing international anxieties over the volatile geopolitical landscape and the potential for a wider conflict.

Singapore, as a nation with virtually no domestic energy resources, is acutely vulnerable to fluctuations in global oil and gas prices. The country relies heavily on imports to meet its energy demands, making it susceptible to external shocks. A substantial surge in energy costs would translate directly into increased expenses for businesses and consumers, potentially slowing economic growth and impacting the cost of living. The PM's comments serve as a stark reminder of Singapore's interconnectedness with global events and the necessity for proactive economic planning in the face of uncertainty.

Beyond the immediate economic impact, a regional conflict could also disrupt crucial supply chains. Singapore functions as a major logistical hub for Southeast Asia and beyond, and disruptions to maritime routes through the Middle East, a vital artery for global trade, would have cascading effects on the nation's economy. Increased shipping costs, delays in delivery, and potential shortages of essential goods are all potential consequences.

PM Lee reiterated Singapore's long-held stance of advocating for peace and stability. "Singapore's position is very clear. We want peace, and we want stability," he emphasized. He urged for "careful diplomacy to try to de-escalate the situation," highlighting the importance of international cooperation to avert a crisis. This position aligns with Singapore's historical role as a neutral and constructive voice in international affairs, often serving as a bridge between differing viewpoints.

Two-State Solution Diminishes, But Remains the Only Path

The Prime Minister also addressed the long-standing Israeli-Palestinian conflict, acknowledging the diminishing prospects for a two-state solution. While acknowledging the increasing difficulties in achieving a lasting peace, he maintained that it remains the only viable pathway forward. "The two-state solution is the only way forward, but it's getting more and more difficult to achieve, because the environment is not conducive to it," he explained. He stressed that meaningful progress requires compromise from both sides, a feat that appears increasingly challenging given the current climate of distrust and animosity.

Experts suggest the current environment hindering the two-state solution includes several factors: continued Israeli settlement expansion in the West Bank, the political fragmentation within the Palestinian territories, and a lack of sustained, credible international mediation. The recent escalation of tensions further complicates the situation, potentially pushing the possibility of a negotiated settlement further out of reach.

Singapore's Potential Role in De-escalation

When questioned about Singapore's role in promoting de-escalation, PM Lee reiterated the nation's commitment to diplomatic efforts. While Singapore is a small state with limited direct influence over the major players in the Middle East, it can leverage its reputation for neutrality and its strong diplomatic ties with various countries to facilitate dialogue and encourage restraint. Singapore's membership in regional and international organizations also provides platforms for advocating for peaceful resolutions. Analysts suggest Singapore could quietly utilize these channels to engage in back-channel diplomacy, offering a safe space for dialogue and exploring potential pathways to de-escalation.

Furthermore, Singapore's economic ties with both the United States and countries in the Middle East, including Iran, could potentially be leveraged to promote economic incentives for peace.

The Prime Minister's warning serves as a call to action, urging international actors to prioritize diplomacy and prevent a further escalation of tensions in the Middle East. For Singapore, it underscores the need for continued economic diversification, investment in renewable energy sources, and robust contingency planning to mitigate the potential impact of a prolonged crisis.