Wartime is a good test of financial resilience.
The notorious “Red Horse and Red Sheep Calamity” (赤马红羊劫) comes every 60 years. It is infamous to bring along fire, volatility, riots and warfare. Coincidentally, it falls in the years 2026 and 2027.
While we were still celebrating Chinese New Year, the United States and Israel couldn’t hold their horses and attacked Iran on February 28. Henceforth, expect an unceasing cycle of peace talks, new attacks and retaliatory strikes.
How bad the Middle East crisis is going to impact Singapore’s economy? All this while, we thought we have good financial health and sound risk management. Until the unexpected takes away our peace of mind and exposes our vulnerability.
Singapore suffers the most?
After the outbreak of the Iran war, anticipations of oil supply shortage pushed crude oil prices to US$119 per barrel in a matter of days. During Middle East wartime in the 1970s and 1980s, soaring oil prices led to high inflation and global recession.
Deputy Prime Minister Gan Kim Yong said, “Higher energy prices could lead to higher costs for businesses and consumers, and weigh on the global and Singapore economies.”
Worse still, Foreign Affairs Minister Vivian Balakrishnan named this fuel crisis an Asian crisis. Companies and consumers in Asia are expected to bear the brunt of skyrocketing fuel prices.
According to the International Energy Agency, 80 percent of the 20 million barrels of crude oil shipped through the Strait of Hormuz last year were exported to Asia. In fact, about 60 percent of Asia’s crude supply comes from the Middle East. In Singapore, the reliance on oil imports from the Middle East can be as high as 70 percent.
There is no non-renewable resource in Singapore. We depend on imports of energy, agriculture and food products, construction and industrial materials. Their shipments need oil.
Singapore car owners now pay 20 percent more for petrol. They queue at lower-priced petrol stations and regret not upgrading to EVs earlier. Finally, there is silver lining for the struggling China EV market facing fierce competition and price wars at home.
To cope with fuel shortage, many countries have already started cutting work hours and electricity usage. Myanmar, Bangladesh and Sri Lanka are implementing fuel rationing. Australia and some European countries are planning to follow suit.
On the other hand, there is renewed interest in alternative energy sources such as coal, nuclear and solar power, especially using cleaner energy for industries with heavy fuel consumption.
Why Asian currencies are shrinking during wartime
For Asian currencies not pegged to the US dollar, they are being battered now for two reasons:
1. Escalating oil prices
Since oil trading is mainly in US dollars, a surging greenback put the value of other currencies under pressure.
“India’s rupee, Indonesia’s rupiah and the Philippine peso have been pulled to record lows against the US dollar this month, along with major troughs for the yen and South Korean won.”
“Asian currencies – some already struggling – have come under heavy selling, putting them among the largest losers globally. This has brought back memories of the Asian financial crisis and leaves policymakers with some unpleasant choices: Raising rates, spending reserves, or seeing their currencies sink further.”
– “Iran war forces Asian economies to confront sliding currencies and surging oil”, Reuters, March 30, 2026
2. Outflow of hot money
During uncertain times, hot money is finding its way back from higher-risk investments and developing countries to safe-haven assets in US dollars.
“And as often happens in times of global turmoil, investors are taking money out of riskier regions and putting more money into U.S. assets. That is driving up the dollar, which is approaching its highest value against Asian currencies in the past two decades. A result is that many currencies are growing weaker just when their buying power is most needed.
However, more costly imports mean a country’s households and consumers must bear higher prices. And that can destabilize society and even topple governments.
Even the governments of Asia’s richer countries will not have the resources to spare its citizens from all the effects if this crunch persists.”
– “Asia is getting crushed between oil prices and the dollar”, The New York Times, March 25, 2026
Asia’s rush to protect sliding currencies
Countries in Asia are scrambling to save their shrinking currency against the rising US dollar. The fastest ways are to raise rates or dig into their reserves during this wartime.
On March 17 the Reserve Bank of Australia took the lead to raise the official cash rate by 25 basis points to 4.1 percent. South Korea turned to its world’s third largest national pension fund to save the won.
The next Monetary Authority of Singapore quarterly review meeting will hold in April to cover inflation outlook and increasing import costs caused by the Middle East crisis. The market predicts Singapore will tighten its monetary policy by reducing money supply and making borrowing more expensive.
By the way, measures to strengthen the Singdollar have already started. The latest round of 6-month treasury bill auctioned on March 26 saw the cut-off yield jumped to 1.46 percent – a 6.6 percent surge from 1.37 percent in the last round.
Although it is still far from its peak of 4.06 percent in October 2023, the return of Singapore government securities and bank saving rates are likely to trend upward.
Likewise, the US and European government bond yields surged sharply. Fear of prolonged inflation caused by escalating oil prices in wartime drove up fixed interest government debts. The current 10-year US treasury yield jumped to 4.39 percent, while the 10-year European government bond yields are hovering between 3 to 4 percent.
The higher return from long-term government bonds reflects higher market volatility resulting in higher risk premiums. This also implies the rapid loss of trust in worldwide government debts.
From rate cuts to rate hikes again
Fuel, logistics, supplies and all related costs will be going through the roof during wartime. The domino effect of the Middle East crisis reverses rate cut expectations to rate hike worries.
Two weeks ago, once again Federal Reserve dashed the market’s hope of a long-awaited rate cut. As Fed chair Powell said, “the possibility that the Fed’s next move might be an increase did come up at the meeting as it did at the last meeting”. The fear of the Fed’s move to raise rates to fight spiraling oil prices and higher inflation sent stock prices down. The US 30-year fixed mortgage rate rose to a 5-month high of 6.43 percent.
For a new wave of rate hikes, the question is not whether it will, but when and how far it will go. In other words, the concern is how rapid and how aggressive the central bank will raise rates this time.
The saga of Fed’s 11 consecutive rate hikes in 16 months from March 2022 to July 2023 is still fresh in our mind. In Singapore, the 3-month SIBOR continued climbing from 0.5 percent in early 2022 to above 4 percent. Rates remained high for almost two years before they finally came down.
Imagine an unforeseen new rate hike cycle awaiting homeowners, landlords and corporations with outstanding loans from the banks. Bad news for the borrowers but good news for the savers.
Property is a bad investment during wartime
In 2017, I wrote the post “Is property a good investment in times of war?”. It remains one of the most viewed posts in my blog. Different assets perform differently during and after wartime. Overall, land is a better investment than properties.
There are a few reasons why property is not a good investment in times of war:
1) Inflation, supply chain and logistics challenges increase the chance of construction delay. This is similar to the postponement of completion deadlines during and after the pandemic.
2) Higher interest rates affect affordability of real estate. Higher returns from fixed income products also make returns from properties less attractive.
3) Most property buyers do not pay with full cash but using leverage from the banks. Money tightening makes it difficult for potential buyers to secure bank loans. A shrinking buyer pool drags down property prices.
4) When a recession is imminent, banks are infamous for calling back loans during bad times. Think what happened to Singapore homebuyers during the last global financial crisis.
“Under the Black Swan of the subprime crisis in 2008, banks in Singapore tightened lending to property buyers who bought off-plan properties. They suddenly offered lower LTV or withdrew previously approved loans. Many homebuyers bought at high prices in 2007 and were caught totally unprepared. With the decline in valuation, they could not find any bank loan to match their original purchase price. They were asked by their banks to put in more cash to secure financing. When they couldn’t raise the money, they were forced to dump their properties in a depressed market.”
– Vina Ip, Behind The Scenes of The Property Market
Singapore’s real estate market in wartime
Singapore has a total of 41 REITs and property trusts with a market capitalization of roughly S$88 billion. After the outbreak of the Iran war, the S-REIT index immediately plunged 6 percent.
Market uncertainties, potential worsening of economy and ascending interest rates are going to add pressure to S-REITs. This is bad news for analysts who spent so much effort to drive investors back to S-REITs after prices tumbled during the rate hike period.
Of course, not all S-REITs are equal. Investors need to exercise individual judgement to decide which REITs will be least affected.
For private residential properties, recent new launches Rivelle Tampines EC and Pinery Residences managed to sell over 90 percent of total units. An analyst said the buyers are betting that the negative effect of Iran war will be over four years from now.
Four years? We have seen countless times how an investment’s value dived in months, not to mention four years. Personally, I may be willing to wait for four years if it is a good asset and price is dirt cheap or at historical low.
Singapore homebuyers and HDB upgraders are incredibly bold. During this wartime, even the most daring traders or investors are holding back amid uncertainties. Nobody wants to get burnt when things are out of their control.
It is difficult to make sense of Singaporeans’ conflicting mindset. On one hand, they are kiasu and afraid to lose. They are conservative, cautious and practical. Most of them prefer to follow rules. But when it comes to things like buying homes, they suddenly become adventurous and courageous. They won’t hesitate to take the plunge to embrace the unknown. The leap of faith on something filled with uncertainties is contradictive to the conventional Singapore culture.
Four wartime money strategies
During geopolitical turmoil, the financial focus of investors is to protect wealth and keep losses to a minimum. They tend to limit their exposure to more risky investment products such as high growth equities and cryptocurrencies, while switching to safe-haven assets such as gold, defensive stocks, government bonds and US dollars.
For those less financially savvy, below are three useful strategies:
1) Pay off all outstanding loans and mortgages ASAP before rate hikes in auto-pilot mode again. You need to “get even” with the banks first before you can control your fate.
2) Prioritize liquidity. Cash is king. There is a good chance that savers can sit back and live off from high returns of fixed income products. You also need cash to buy any undervalued asset.
3) Expect food and grocery prices to shoot up. For big families, you can stock up on non-perishable necessities just in case.
Above all, invest in your health now. Inflation will definitely elevate healthcare costs. It is unwise you sacrifice health to make a few more dollars. Do everything right: dump bad habits, eat healthily, exercise regularly, sleep well and don’t stress. No need to ask for any indispensable supplements or the best insurance coverage. Always be in the pink of health so that no doctor, hospital or pharmaceutical company can make money from you.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
My book Behind The Scenes of The Property Market is available for preview and order online.
If you miss “The Future of Singapore Homes” education seminar, you can watch the recording here.
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