‘Unprecedented’ energy disruption from Middle East war: Govt announces support measures

SINGAPORE – Singaporeans should be prepared that disruptions from the Middle East conflict will impact more sectors of the Republic’s economy and lead to higher electricity and food prices, said Deputy Prime Minister Gan Kim Yong.

He warned that the effects of the crisis are likely to intensify in the weeks ahead and persist for some time to come, as the Government on April 7 announced nearly $1 billion in relief measures for households and businesses here.

DPM Gan was one of three ministers who made ministerial statements in Parliament about the war’s impact on Singapore and the Government’s response, as the conflict between the United States, Israel and Iran entered its sixth week and the situation remained unclear as to when the Strait of Hormuz will reopen.

The closure of the strait has caused a global shortage of energy supplies including crude oil and gas, he said. “Such a severe choking-off of supply is unprecedented – it is the worst disruption since the 1973 oil embargo.”

Besides leading to a surge in energy prices, the disruption extends to other key products like fertilisers, which are derived from natural gas, and aluminium, which is used to make cars and planes, DPM Gan said.

Higher energy prices have already led to increased transport and shipping costs, and this will eventually push up costs of other items such as food. Rising business costs and consumer prices will in turn dampen demand, said DPM Gan, who is also Minister for Trade and Industry.

At home, sectors that are directly impacted include manufacturers that rely on natural gas and crude oil as feedstock. They include chemical producers such as Jurong Island-based PCS, which has already declared force majeure due to supply disruptions, he noted.

Services sectors such as air and sea transport and tourism will also be affected by higher costs and weaker external demand, he said, adding that domestic-facing sectors such as retail, food and point-to-point transport will face higher utilities and fuel costs.

Singaporeans should also expect a much sharper increase in the next electricity tariff adjustment, given that the previous adjustment reflected only a small portion of the recent surge in fuel prices, said DPM Gan. This is as fuel makes up about half of the regulated electricity tariff.

He said Singapore’s economic growth in the coming quarters is likely to be affected by the conflict, while cost increases are expected to push the city-state’s overall inflation for 2026 above earlier projections.

“These pressures will be felt by households in more expensive electricity, transport and daily necessities,” he said. “Lower-income households will be more affected as a larger share of their spending goes towards essentials.”

Acting Minister for Transport and Senior Minister of State for Finance Jeffrey Siow said the Government is not waiting to act, and will supplement what was announced in Budget 2026 with a further package of support measures.

About 2.4 million Singaporeans will receive an enhanced Cost-of-Living Special Payment, which will be increased by $200. Those eligible will get between $400 and $600 in September.

To help workers who have been most affected, $200 in cash will be disbursed to active platform workers, private-hire car drivers and taxi drivers by end-April.

Other measures include increasing the corporate income tax rebate for the 2026 year of assessment from 40 per cent to 50 per cent, with the total benefits cap per company raised from $30,000 to $40,000.

“We do not know how long the conflict and its economic impact will last, but the Government is alive to the situation,” said Mr Siow. “We have drawer plans, and as events develop, we can put them into action and do more if the situation calls for it.”

S’pore must stay disciplined, maintain its credibility: Gan

Coordinating Minister for National Security K. Shanmugam said that while Singapore has to pay much higher prices today for its energy supplies, it has not had to announce export restrictions or implement fuel rationing, as some other countries have done.

This is the result of the Government’s deliberate long-term strategy to build the city-state into one of the world’s largest oil trading and refinery export hubs, which has given it access to diverse sources of energy and fuel supplies.

As a major refinery centre, some countries that supply crude oil to Singapore in turn depend on the city-state to supply them with refined petroleum products that they need. “This creates mutual interdependence – it keeps Singapore relevant in the energy trade, and this has enabled us to have continued access to crude oil,” he said.

The Republic has also taken steps over the years to meet its electricity needs and reduce disruption risks, said Mr Shanmugam, who, as Minister for Home Affairs, also leads the Homefront Crisis Ministerial Committee (HCMC).

The HCMC is Singapore’s apex body to coordinate the Government’s national responses to crises. Prime Minister Lawrence Wong announced on April 2 that the committee has begun its work, which includes updating existing contingency plans and developing new ones.

Mr Shanmugam said that besides the Middle East, Singapore imports liquified natural gas from countries such as Australia, the United States, and Mozambique. While 95 per cent of its electricity is generated from natural gas, the city-state’s power plants can also switch to diesel when needed.

Power generation companies here are required by the Energy Market Authority (EMA) to have pre-arranged contractual access to additional fuel, he said. In 2023, EMA also strengthened regulatory requirements to ensure that electricity retailers are sufficiently hedged against gas price volatility.

Additionally, Singapore has fuel reserves in both natural gas and diesel, and has plans to increase these reserves, added Mr Shanmugam. “It will be costly, but we think it necessary,” he said. “We have so far not tapped on our fuel reserves, nor have we implemented fuel rationing.”

The Republic likewise maintains strategic food stockpiles to mitigate the impact of any unforeseen supply disruptions, and is relooking its supply chains with a view towards strengthening them.

Mr Shanmugam noted that among the 62 questions filed by MPs on the impact of the war and Singapore’s response were some on the extent of Singapore’s fuel and food reserves. As a policy, Singapore does not disclose such details as this would reveal where the country’s limits lie, he said.

“What matters is that we have sufficient buffers and contingency plans in place, and we regularly review and strengthen these arrangements to ensure that they remain robust.”

Following the ministerial statements, the front bench took questions from MPs for over 2½ hours, grouped into three themes: energy and trade-related matters, the impact on local businesses and households, and security issues and related matters.

In response to questions over the country’s energy security, Minister-in-charge of Energy and Science & Technology Tan See Leng said there has been no upstream disruptions to the piped natural gas supply. Singapore also constantly talks to its immediate neighbours to discuss this supply, while at the same time adopting a diversified source country strategy.

To a question by WP MP Fadli Fawzi on whether Singapore will be open to paying a toll for its ships to pass through the Strait of Hormuz, Foreign Minister Vivian Balakrishnan said that as a matter of principle, the city-state will not engage in such negotiations as doing so would implicitly erode the international law principle of all nations’ ships to traverse such straits.

The conflict should bring home for Singapore that being an oasis of safety, security, cohesion and wealth is insufficient if one’s region is aflame with war, he added. “So let’s be upfront with our people – explain the dangers, no sugar-coating.”

DPM Gan said the crisis has reminded everyone of how interconnected and fragile the global system is, and of the need to prepare for more frequent inflation shocks and supply chain disruptions in a world of heightened geopolitical contestation.

While Singapore will strengthen its resilience through stockpiling and source diversification, it will always be dependent on imports for its supplies, he added.

That is why it is critical that Singapore strengthens its partnerships with like-minded countries, and keeps faith with these partners to maintain its credibility as a trading nation, said DPM Gan.

Singapore must also press on to keep its economy resilient and competitive, including by building global leadership in key growth sectors such as advanced manufacturing and by supporting its firms to diversify and internationalise, he added.

“If we stay disciplined, deepen our trust in each other, preserve our capabilities, and use this period to sharpen our competitive edge, Singapore will be well placed not only to weather this crisis, but also to emerge stronger from it,” he said.

In a Facebook post on the evening of April 7, Prime Minister Lawrence Wong said today’s reality can feel like the world is moving from one crisis to another. But Singapore is not standing still, and is instead acting decisively, coordinating across ministries and preparing for different scenarios.

“No Singaporean will have to face this alone. We will support one another – and we will get through this together,” he said.