Singapore inflation accelerates as Iran war drives up petrol prices; higher costs expected to spread

SINGAPORE - Singapore’s consumer prices accelerated in March on the back of higher petrol and retail prices, with the Iran war expected to drive up the costs of more household goods and services.

Overall inflation picked up to 1.8 per cent year on year from 1.2 per cent in February, driven by faster increases in private transport, retail and other goods and services.

Core inflation, which excludes private transport and accommodation to better reflect household expenses, rose to 1.7 per cent from 1.4 per cent, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint release on April 23.

They said Singapore’s imported cost pressures are expected to pick up and broaden in the months ahead.

“As higher energy and other input costs arising from the developments in the Middle East pass through global supply chains, they will raise production and transport costs for a wide range of Singapore’s imported goods and services,” they said.

Private transport inflation jumped from 2.4 per cent in February to 6.6 per cent in March as the Iran war led to a rise in petrol prices here.

Mr Zavier Wong, market analyst at trading platform eToro, noted that petrol prices here have been rising since late February, with March marking the first full month these increases are reflected in official data.

“Energy costs take time to work through supply chains, and what shows up in transport today will probably find its way into logistics, food production and services in the months ahead,” he said.

Electricity and gas prices fell year on year at the same pace of 4.3 per cent in March as in February, but will go up with the higher tariffs already announced for April to June.

MAS said the regulated electricity tariff is set based on the average natural gas prices in the first 2½ months of the preceding quarter, among other factors. As a result, recent increases in global energy prices will be reflected in the tariff only from the second quarter of 2026, starting in April.

Retail and other goods inflation rose to 1.8 per cent in March from 0.6 per cent in February, mainly due to larger increases in the prices of alcohol and tobacco, as well as clothing and footwear.

Services inflation edged up to 2.1 per cent in March from 2 per cent in February, due to larger increases in the cost of point-to-point transport services and higher telecommunication costs.

Food inflation remained unchanged at 1.6 per cent, as non-cooked food prices rose at the same rate in March and February.

Accommodation inflation was unchanged at 0.3 per cent as housing rents rose at a similar pace in March as in February.

MAS and MTI reiterated the new 2026 forecasts for Singapore’s overall and core inflation made on April 17, when they were both raised to 1.5 per cent to 2.5 per cent, from an earlier projection of 1 per cent to 2 per cent.

MAS last week also tightened its monetary policy stance to fight inflation, allowing for a stronger currency to dampen import costs.

DBS Bank senior economist Chua Han Teng said that, looking ahead, the increase in inflation is still nascent and faces broadening upside risks.

“Higher energy prices are translating into increased delivery and logistics costs, as well as electricity and gas costs domestically, which businesses may pass on to consumers in the coming months amid mounting margin pressures,” he said.

While global food price pressures remain relatively contained for now, there are concerns that higher fertiliser costs resulting from the Middle East supply shock could lead to higher agricultural prices.

Lower crop yields may, in turn, exert upward pressure on both global and Singapore’s food inflation.

“In our view, against this backdrop of elevated uncertainty surrounding developments in the Middle East, with considerable risks to inflation and the economy, the MAS would want to maintain policy flexibility,” Mr Chua added.

eToro’s Mr Wong said the key issue is whether March marks the early stage of higher energy costs feeding through to consumer prices or something closer to the peak.

“Ceasefire talks between the US and Iran have shown increasing signs of strain, and the disruption at the Strait of Hormuz remains unresolved... If the conflict extends through the second quarter of 2026, the transmission into food, logistics, and services costs will become considerably harder to dismiss,” he said.

Correction note: In an earlier version of the story, we said that food inflation remain unchanged at 0.6 per cent. This is incorrect. It should be 1.6 per cent. We are sorry for the error.