The Iraq crisis will not, in all likelihood, have a major impact on Singapore's economy, say oil industry experts and economists.
They argue that the current conflict is unlikely to cause major disruptions to oil supplies even though oil prices have spiked since the crisis erupted.
In fact, some analysts caution that the greater threat to local inflation is the El Nino weather phenomenon, which could send food prices soaring amid crop failure.
"Currently, it's a domestic problem, not an international one - that makes it different from the (first) Gulf War which was between Iraq and Kuwait," oil industry consultant Ong Eng Tong told The Straits Times yesterday.
Crude oil prices have soared to their highest levels in nearly 10 months, as Brent - a key global barometer from Europe's North Sea - hit US$115 a barrel yesterday.
Economists here note that historically, a sweet spot for Singapore's economy, in terms of growth and inflation, occurs when oil prices are in the US$70 to US$110 range.
CIMB economist Song Seng Wun pointed out that it would require oil prices to cross US$140 in order for growth here to be adversely affected. "Our businesses are more energy-efficient these days. Their oil dependency has been reduced," he said.
Iraq accounts for about 3.6 per cent of the world's oil production. Most of its crude oil exports are transported by a pipeline in the north to the Turkish port of Ceyhan or the Basra oil shipping terminal in the south, which sits in the Persian Gulf. The majority of Iraq's crude oil exports to Asia are sent to China, India and South Korea, according to 2012 data from the United States Energy Information Administration.
"A disruption to southern flows is not probable, but it's certainly possible," noted Societe Generale oil analyst Michael Wittner last week. "As a rough estimate, we put the probability of an actual disruption, partial or full, at 20 per cent."
He said that if an actual supply disruption occurs, it would likely result in Brent crude reaching the US$120 to US$125 range.
Analysts said that if this happens, it would most likely result in swift intervention from the Organisation of Petroleum Exporting Countries (Opec) and a release of reserves to prevent further price rises.
"I expect that the problem won't blow up because Saudi Arabia and the other Opec members will step in," said OCBC Bank commodities analyst Barnabas Gan, adding that there is unlikely to be high inflationary pressure on Singapore arising from the crisis.
"What we should be worried about is El Nino, which could give rise to high food prices here."
This refers to a weather phenomenon caused by the warming of water in the Pacific Ocean near Peru and Ecuador, which results in heavy rain in dry areas and drought in usually wet places. It causes crop failure.
In the short term, however, Singapore could face higher costs in the form of mild rises in petrol and electricity bills, said Mr Song.