Singapore has energy buffers and strong public finances that reduce near-term risks from Middle East tensions. It has established infrastructure, diversified sourcing, strong logistics, large inventories, and the ability to stockpile more fuel or provide targeted support if disruption through the Strait of Hormuz continues.
The energy system includes deep infrastructure and storage, and fuel reserves that remain untapped, with no rationing so far. As a global bunkering hub, Singapore holds large inventories and storage capacity that can help manage temporary supply shocks.
Natural gas accounts for about 95% of electricity generation, and supplies from Qatar may face strain. Mitigation options include LNG imports from Australia and the US, the ability to switch to diesel for electricity generation, and strategic fuel reserves held by the government and power generators.
Risks would increase if energy flows through the Strait of Hormuz are disrupted for a prolonged period. This supports plans to expand fuel reserves further.
Given the recent spike in market anxiety over Middle East tensions, we see an opportunity in the Singapore Dollar. The city-state’s significant energy infrastructure, diverse supply chains, and large fuel reserves provide a substantial buffer against short-term shocks. This suggests the immediate sell-off in SGD-related assets is likely overdone.
For derivative traders, this points toward selling volatility on the currency in the coming weeks. After 1-month implied volatility on USD/SGD jumped to 7.5% following last week’s incident in the Strait of Hormuz, option premiums now appear rich. The country’s ability to switch from natural gas to diesel for power generation and tap into strategic reserves should anchor the currency, making a sharp breakout less probable.
This view is supported by recent data showing Singapore’s underlying stability. March 2026 core inflation came in at a manageable 3.1%, indicating price pressures are not yet spiraling despite a brief jump in Asian LNG benchmark prices to over $18/mmBtu. The fact that the Monetary Authority of Singapore has not signaled any emergency policy shift reinforces our belief in the currency’s resilience.
Looking back, we saw how Singapore’s fiscal strength allowed it to navigate the energy price chaos of 2022 and 2023 without major economic dislocation. The primary risk to this strategy would be a prolonged, multi-month disruption to energy flows, which would test the limits of those reserves. Therefore, any positions should be managed with a close eye on geopolitical developments beyond the next few weeks.
