Singapore’s recent economic expansion, fueled by a surge in artificial intelligence-related manufacturing, is increasingly exposed to external geopolitical and trade risks.
While the city-state’s economy grew by 5.7% year-on-year in the second quarter of 2026, analysts warn that this momentum could be undermined by rising energy prices stemming from the Iran conflict and potential US tariff measures.
The Strait Times reports that beyond the immediate impact of elevated energy costs, the El Nino weather pattern poses an additional threat by potentially driving up food prices.
These factors combine to create a complex risk environment for Singapore’s trade-dependent economy, which has relied heavily on robust global demand for tech hardware.
Inflation data from April showed a rate of 1.8%, below the 2% forecast by economists.
However, this relative calm is expected to be short-lived as the full impact of energy cost increases linked to the Iran war is anticipated to manifest later in the year.