Middle East War Fuels Oil Shock, MAS Faces Policy Test

As the war in the Middle East enters its fifth week, central banks, including Singapore’s Monetary Authority of Singapore (MAS), face a dilemma: counter oil-driven inflation or cushion slowing growth. MAS will announce its next policy decision in April. Standard Chartered economist Madhur Jha noted that four of five global recessions were preceded by oil shocks.

Oil Shock

The Iran conflict has effectively closed the Strait of Hormuz, a key conduit for one-fifth of global crude and LNG, while disrupting supplies of fertiliser inputs and metals like aluminium. Brent crude surged to US$115.58 on March 30, up 60 per cent this month, with petrol, diesel and jet fuel prices doubling. Analysts warn prolonged energy price spikes will erode consumer demand and industrial production, compounded by supply chain disruptions. Even if hostilities end soon, damaged plants in the Gulf will take longer to repair, delaying supply normalisation and price stability.

SG Business

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