The Gulf crisis is a warning. Singapore should heed its lessons

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When Iranian drones struck a fuel tank near Dubai International Airport on March 16, it did more than ignite jet fuel. It punctured a narrative – the carefully constructed idea that a small, open economy could separate itself from the geopolitics of the region it inhabits.

In the weeks since the US-Israel strike on Iran on Feb 28, over 2,600 missiles and drones have been fired at the United Arab Emirates, forcing the closure of its airspace. Even Qatar and Oman, both active mediators between Washington and Tehran, were hit. Brent crude, which sat at around US$71 a barrel a month ago, has since hovered above US$100. Some private wealth manager friends of mine in Singapore are getting calls from Dubai-based clients looking to relocate capital.

Like many others, I have somewhat of a personal stake in this. I relocated to Dubai in early 2025 with my family – drawn primarily by convenience, since Dubai is a midway point between the markets I work across in Asia, the Middle East and the US, but also to set up my company’s presence in the Middle East. Contrary to what many others are putting out there, I’m not writing Dubai’s obituary. This is an emirate with a proven ability to absorb shocks and adapt. It has done it before, and I expect it to do it again.

But I am also Singaporean. And as I watched missiles streak across Gulf skies, a different set of anxieties kicked in – ones that have less to do with where I live now and everything to do with where I am from. Because the uncomfortable truth is: what is happening to Dubai could, under a different set of geopolitical circumstances, happen to Singapore. And we should be honest enough to say so.

The structural parallels are hard to ignore.

Dubai built a world-class financial ecosystem on two pillars: favourable regulation and the perception that the emirate existed in a kind of geopolitical bubble – in the Middle East but not quite of it. That pitch attracted thousands of enterprises, drew nearly 10,000 millionaires in 2025 alone, and turned the city into a magnet for family offices managing north of a trillion dollars collectively.

Operation Epic Fury put that sense of security to the test as Iran’s Revolutionary Guard Corps responded to the US-Israel joint offensive by attacking all six Gulf Cooperation Council states, striking at civilian airports, energy infrastructure, desalination facilities, luxury and commercial districts, and data centres. Shipping through the Strait of Hormuz has seized up. As the Middle East Council on Global Affairs observed: “If states that have clearly declared their refusal to take part in any confrontation begin to be treated as potential or legitimate targets, the strategic basis that governs their interactions becomes severely shaken.”

Neutrality, it turns out, is a posture. Not a shield.

Now look at our little red dot.

Singapore is, by any measure, one of the most trade-exposed economies on the planet – trade accounts for over three times our gross domestic product. Our asset management industry just crossed US$6 trillion (S$7.7 trillion). Non-residents make up a third of our 6.11 million people. We are, like Dubai, a place that works precisely because the world trusts it to be stable, open and neutral. Remove any one of those adjectives and the model does not just weaken – it unravels.

The stranglehold that Iran currently has over the Strait of Hormuz, with serious implications for the Gulf states and beyond, has also highlighted the dire straits we could be in should trouble break out over key maritime passages in our part of the world.

The Malacca Strait, which separates us from Indonesia, handles roughly 40 per cent of global trade and 80 per cent of China’s oil imports – making it the single busiest maritime choke point on earth. Hostilities over the Taiwan Strait are another nightmare scenario. Taiwan, the flashpoint that keeps defence planners in Washington and Beijing awake at night, is about 4½ hours by air from Changi.

Our security architecture leans heavily on the United States. The 2005 Strategic Framework Agreement gives American forces access to our military facilities. Changi Naval Base can dock a US aircraft carrier. Meanwhile, China is our largest trading partner, with the relationship expanding into artificial intelligence, green tech and digital infrastructure. The lack of strategic trust between the two superpowers is a gap Singapore occupies, profitably but precariously.

This is not hypothetical anxiety. A December 2025 report by the Council on Foreign Relations warned that a Taiwan crisis “would likely draw in additional powers, expand geographically, and escalate vertically”. It specifically noted that “Singapore could become a target, especially if a concerted effort is made to interdict Chinese commercial shipping in the South China Sea and through the Malacca Strait, or if the United States uses military bases in Singapore to refuel and conduct maintenance”.

We cannot rule out a scenario where Singapore’s most important security partner pulls it into a conflict with its most important economic partner, calling into question the neutrality we have spent decades cultivating.

So what do we do? I think the answer is what Singapore has always done – but with more urgency and more honesty.

Diversify beyond the binary

Prime Minister Lawrence Wong’s diplomatic push into Africa and South America is the right instinct. The Future of Investment and Trade Partnership, launched in 2025 with 14 countries across six continents, is exactly the kind of initiative a small state needs – more friends, fewer dependencies. We should double down.

The reason is not just about trade volumes; it is about leverage. If a US-China conflict ever forces Singapore to pick a side, the breadth of our other relationships determines how much room we have to manoeuvre. A country that sources critical inputs from only two blocs has no fallback. A country woven into supply chains across the Middle East, Latin America and Africa has alternatives – alternative energy suppliers, alternative shipping corridors, alternative diplomatic coalitions of like-minded small states that can amplify our voice when it matters most. Diversification is not a hedge against trade loss. It is a hedge against losing the ability to say no.

Stress-test the model

What happens to US$6 trillion in managed assets if Changi Airport shuts for a week? If the Malacca Strait becomes contested? If financial counterparties freeze transactions, as they briefly did in Dubai when Iranian strikes disrupted banking systems? The Monetary Authority of Singapore should be running these scenarios the way banks run capital stress tests. And the results should inform a broader public conversation about resilience – not because investors need to be scared, but because demonstrating that you have stress-tested worst-case scenarios and built contingencies is itself a signal of stability.

Invest in strategic ambiguity

Our defence cooperation with the US is deep and visible. What is less commonly discussed is that Singapore’s military engagement with China is more advanced than most people assume. The two countries have held Exercise Cooperation military exercises since 2008, with the seventh edition taking place as recently as December 2025 at SAFTI Military Institute. A direct defence hotline was established in 2023, and a broader Agreement on Defence Exchanges and Security Cooperation has been in place since 2019.

Singapore has also begun diversifying its defence procurement towards European suppliers – contracts with Saab, MBDA and Thales reduce dependency on any single power’s hardware pipeline.

Would Washington love deeper Singapore-Beijing defence ties? Probably not. But this is the essence of small-state realpolitik: you build enough trust with both sides that neither can afford to treat you as an adversary. As Foreign Minister Vivian Balakrishnan has put it, Singapore “cannot be bullied or bought”. While this is true, such a posture works in practice only if it is backed by relationships substantive enough to make the cost of coercion real.

Prepare our people, not just institutions

Singapore has allocated 3 per cent of GDP to defence in 2026 – roughly $23.4 billion – and said the Government is “prepared to spend more if the need arises”. Singapore has always been better than most at levelling with its citizens. But that instinct should go further. Public scenario-planning exercises – the kind that walk citizens through what a regional disruption might actually look and feel like – would build resilience from the ground up.

Civil defence preparedness briefings tailored for the hundreds of thousands of Singaporeans living and working abroad would reinforce the message that our social compact extends beyond our borders. And a transparent communication framework, agreed in advance, would ensure the Government can speak clearly and quickly in a crisis without having to improvise one. None of this requires alarmism. It requires the same clear-eyed pragmatism Singapore has always been known for.

In Dubai, life continues. The malls are open. Construction cranes still turn. The government is responding with the speed and decisiveness the UAE is known for. Some fair-weather visitors and short-term transplants have left for their home countries or elsewhere, but most residents like myself have remained and have no plans to leave in the near future.

But I also know that what happened in the UAE did not arrive with a calendar invite. It arrived with a missile. And the lesson is not that Dubai failed – it is that even the best-run small economies are only as safe as the geopolitical neighbourhood they inhabit.

Both Singapore and the UAE have proven, over and over, that small does not mean powerless. That adaptability is its own kind of strength. While I’m personally betting on both of them, I do hope that Singapore as a country and all Singaporeans and residents draw lessons from this crisis in the Middle East – before the next one is closer to home.