From Hormuz to Red Sea: New choke point puts Singapore at risk of fresh price surge

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SINGAPORE – Even as the Strait of Hormuz remains effectively closed to commercial shipping, choking off oil and gas flows to Asia, fresh disruptions at a second key shipping route could trigger a fresh wave of price pressures in Singapore.

The Red Sea and Bab el-Mandeb Strait could now face disruptions after Yemen’s Iran-aligned Houthi movement entered the war on March 28 with missile strikes on Israel and threats to disrupt shipping through the choke point.

The Strait of Hormuz, which has been closed since the start of the Iran war, lies at the entrance to the Persian Gulf, while the Red Sea – linked to the Indian Ocean via the Bab el-Mandeb Strait and to the Mediterranean via the Suez Canal – forms a second critical corridor for global energy and shipping.

Should the situation in the Red Sea escalate, it could raise the risk of a double chokehold on global trade and energy supply, said Nomura. “Any attacks in the Red Sea would result in the closure of the Bab el-Mandeb Strait,” it said.

The Japan-headquartered investment bank noted that although traffic through the Red Sea had declined since 2023, it remains a key route linking Europe and Asia.

In 2025, flows through the Bab el-Mandeb Strait and Suez Canal were split roughly evenly between tankers, which carry oil, and other cargo ships, with volumes similar to those passing through the Strait of Hormuz, Nomura said.

In a March 29 report, JPMorgan analysts warned that a closure of the Bab el-Mandeb Strait could push oil prices up by as much as US$20 per barrel. Brent crude, a popular oil benchmark, was trading at US$109 per barrel on April 3, which is more than double the price at the start of 2026.

A double chokehold on these key routes would thus feed quickly into higher fuel, electricity and transport costs in countries like Singapore that import their energy needs, with knock-on effects on the prices of food and other goods as the higher costs are gradually passed on by businesses to their customers.

Disruptions to oil supply from the closure of the Strait of Hormuz have already had an impact here, with a rise in petrol, cooking gas and electricity prices, as well as air fares and taxi fares.

Analysts said higher prices are now feeding into the Republic’s bunkering market, which is a global hub for marine fuel supply.

Bunker fuel imports into Singapore fell sharply in March, tightening the availability of key fuels such as very low sulphur fuel oil (VLSFO) in the Republic, data from Lloyd’s List showed. VLSFO is the main fuel used by ships today.

Singapore’s bunker fuel is primarily sourced from the Middle East including Kuwait, where VLSFO exports have been hit following a strike by Iran on the Mina al-Ahmadi refinery on March 20.

The shortfall has forced importers to turn to alternative suppliers such as India, according to Lloyd’s List. At the same time, export curbs by countries such as China and South Korea have further reduced the global supply of bunker fuels and added pressure to prices.

Emergency surcharges

Ms Ines Nastali, senior supply chain analyst at S&P Global Market Intelligence, said shipments into Singapore are exposed to rising bunker fuel costs as carriers are likely to pass on those costs by applying emergency surcharges.

Shipping lines, from Maersk to Singapore-headquartered Ocean Network Express, have already begun passing on higher fuel and war-risk insurance costs to their customers through emergency surcharges, with further price increases likely if energy and logistics costs remain elevated, said Mr Mick Aw, senior adviser at advisory firm Moore Singapore.

Shipping costs had already risen before the surcharges were applied, with container freight rates up about 28 per cent since the start of the conflict, while charter rates for crude oil carriers have risen about 49 per cent, and those for refined products by as much as 78 per cent, Mr Aw said.

He added that the impact also extends to fertilisers and plastics like polyethylene – used to make bottles, bags and toys – which have seen significant price increases.

The rising price of fertiliser, which is used as feedstock, will lift agricultural costs and food prices, with the impact becoming more visible if the Strait of Hormuz remains closed, Mr Aw said, adding that higher plastic prices could also push up the cost of everyday goods.

Shipping lines servicing routes between Asia and Europe are now resorting to alternative routes to bypass the Middle East.

Ms Nastali said the conflict is disrupting global container shipping, causing cargo rollovers, delayed loading and longer port waiting times across Europe, Asia and Africa. She added that waiting times have risen notably in March.

“The disruptions have prompted carriers to seek alternative routes, with Lamu in Kenya experiencing higher vessel calls.”

Still, these alternative routes and ports offer limited relief on costs.

Ships diverted around the Cape of Good Hope face longer journeys – adding about 10 days to 15 days – requiring extra bunker fuel and leading to fewer available ships, which drive up freight rates.

Overall, any disruption to Red Sea shipping would block transit via the Bab el-Mandeb Strait and the Suez Canal, at a time when the Strait of Hormuz is already blocked.

These disruptions will aggravate the supply crunch in crude oil and petroleum products, but also in select non-energy sectors, Nomura said.

Any disruption in the Red Sea could thus increase risks to growth and inflation in Asia, including Singapore, and is something to watch closely.