Iran’s Crisis

by | Jan 11, 2026 | Uncategorized | 0 comments

Executive Summary

Iran is experiencing its largest uprising since the 2022 Mahsa Amini protests, with demonstrations erupting across all 31 provinces following a sharp economic collapse. At least 51 protesters, including nine children, have been killed, with estimates from some sources suggesting up to 2,000 deaths as security forces employ lethal force against demonstrators. The Iranian government has imposed a near-total internet blackout, severing the nation from the outside world.

For Singapore, a small trade-dependent economy positioned at the crossroads of global maritime commerce, Iran’s deepening crisis presents significant challenges across multiple dimensions: energy security, shipping routes, regional stability, economic partnerships, and geopolitical positioning.

Background: Understanding Iran’s Current Crisis

The Trigger: Economic Collapse

The protests began on December 28, 2025, triggered by a catastrophic currency collapse that saw the Iranian rial lose nearly 80% of its value. The economic deterioration was driven by rising inflation and unemployment reaching 7.5 percent, creating conditions where ordinary Iranians could no longer afford basic necessities.

Escalation and Crackdown

What began as merchant strikes in Tehran’s Grand Bazaar quickly evolved into nationwide anti-government demonstrations. Protesters have been chanting “Death to the dictator” in reference to Supreme Leader Ali Khamenei, calling for regime change rather than mere reform. The government’s response has been swift and brutal, with security forces opening fire on crowds and authorities implementing communications blackouts to prevent documentation of abuses.

International Context

The crisis occurs against a backdrop of significant external pressure: in 2025, the US and Israel struck Iran’s nuclear programme, the UN reimposed sanctions, and Iran’s economy continued to struggle. The World Bank projected that Iran’s economy would shrink in both 2025 and 2026, with annual inflation approaching 60%.

Impact Analysis for Singapore

1. Energy Security and Oil Market Volatility

Singapore’s Energy Vulnerability

Singapore is almost entirely dependent on imported energy, making it acutely vulnerable to disruptions in global oil markets. Singapore is the fifth-largest refinery and export hub in the world, and among the top 10 exporters of petrochemicals, with oil-related activities contributing approximately 5% of GDP.

The Strait of Hormuz Factor

Flows through the Strait of Hormuz in 2024 and the first quarter of 2025 made up more than one-quarter of total global seaborne oil trade and about one-fifth of global oil and petroleum product consumption. This narrow waterway, bordered by Iran and Oman, serves as a critical chokepoint for global energy supplies.

China, India, Japan, South Korea, and Singapore were the largest destinations for crude oil moving through the Strait of Hormuz to Asia, accounting for 65% of all Hormuz crude oil flows. Any disruption to this route would have immediate and severe consequences for Singapore’s refining industry and energy imports.

Current Risk Assessment

During the 12-day war in June 2025, Iran considered closing the Strait of Hormuz to force the United States and Israel to stop attacks. While Iran did not follow through, the ongoing protests create new uncertainties. The probability of closure depends mainly on the threat that Israeli and US operations pose to the existence of the Ayatollah regime.

If the protests threaten regime survival, Iran might attempt to close or disrupt the Strait as a desperate measure to compel international intervention or as retaliation against perceived external interference.

Economic Implications for Singapore

Rising Energy Costs: Rising global oil prices pose upside imported inflation risks for Singapore. Higher energy prices would flow through to:

  • Increased electricity and gas tariffs, as natural gas prices are pegged to oil prices
  • Higher transportation costs affecting goods and services
  • Reduced competitiveness for energy-intensive industries like chemicals and petrochemicals
  • Upward pressure on the Consumer Price Index

Refining Industry Opportunities and Challenges: While Singapore’s refining sector might benefit from higher margins during supply disruptions, prolonged instability could force refineries to seek alternative crude sources at premium prices, squeezing profitability.

2. Maritime Security and Shipping Disruptions

Singapore’s Dependence on Sea Routes

Trade exceeds GDP by almost three and a half times on average over the past decade in Singapore, with the overwhelming majority transported by sea. The city-state’s prosperity is fundamentally tied to the free flow of maritime commerce.

Historical Precedents and Current Threats

In May 2015, the Alpine Eternity, a Singapore-flagged chemical tanker, was fired at by Iranian naval vessels while transiting the Straits of Hormuz. More recently, the Marshall Islands-flagged oil tanker Talara, en-route from the United Arab Emirates to Singapore, was intercepted and diverted into Iranian territorial waters in November 2025.

These incidents demonstrate Iran’s willingness to target commercial vessels, particularly during periods of heightened tension. If the current crisis intensifies, Singapore-bound shipping could face:

  • Increased insurance premiums and war risk surcharges
  • Delays and rerouting adding significant time and cost
  • Physical threats to vessels and crews
  • Potential for mistaken targeting during military escalation

Broader Regional Security Implications

The Persian Gulf crisis compounds existing maritime security challenges. Singapore already faces navigational risks from piracy in Southeast Asian waters and disruptions around the Bab al-Mandeb Strait due to ongoing conflicts. Multiple simultaneous chokepoint disruptions could severely constrain global trade flows.

3. Trade and Economic Relations

Direct Singapore-Iran Trade

In 2023, Singapore exported $10M to Iran, with main products being orthopedic appliances, packaged medicaments, and air pumps. While modest in absolute terms, exports have decreased at an annualized rate of 61%, from $1.1B in 2018 to $10M in 2023, reflecting the impact of international sanctions and deteriorating economic conditions.

The limited direct trade means Singapore faces minimal immediate bilateral economic losses. However, the historical trajectory shows what was once a significant trading relationship ($6.6 billion in 2011) reduced to near insignificance by sanctions pressure.

Indirect Economic Channels

More significant are the indirect effects through:

Regional Trade Partners: Malaysia and Indonesia, Singapore’s critical neighbors and trade partners, maintain economic ties with Iran. Disruptions to their trade could cascade to Singapore through integrated supply chains.

Energy Markets: As major oil and gas consumers, Singapore’s trading partners in Northeast and Southeast Asia would all face higher energy costs if Iranian instability drives up prices, potentially slowing regional economic growth and reducing demand for Singapore’s exports and services.

Financial Services: Singapore’s financial sector, while carefully complying with international sanctions, maintains correspondent banking relationships across the Middle East. Financial instability spreading from Iran could complicate these relationships and increase compliance costs.

4. Geopolitical Positioning and Foreign Policy

Singapore’s Delicate Balancing Act

Geopolitics in the region continues to be shaped by increasingly complex and adversarial relationships between major powers, whose divergent national interests intersect in Southeast Asia. Iran’s crisis adds another dimension to this complexity.

Singapore must navigate between:

  • The United States, which has hardened its stance against Iran with President Trump suggesting military action if Iran reconstitutes its nuclear program
  • China, which maintains strategic economic ties with Iran despite US sanctions
  • Middle Eastern partners, including both Iran’s adversaries (Saudi Arabia, UAE) and countries seeking regional stability

Policy Implications

ASEAN Engagement: Iran signed a friendship treaty with ASEAN, and several member states maintain varying degrees of relations with Tehran. Singapore will need to coordinate with ASEAN partners while managing its own interests.

Non-Aligned Positioning: Singapore has historically upheld UN-approved sanctions while avoiding unilateral positions that might alienate trading partners. The Iran crisis tests this approach, particularly if the US demands more explicit alignment.

Humanitarian Concerns: The UN human rights chief called for an independent investigation into reports of deaths and widespread arrests, with rights groups reporting nearly 50 killed and hundreds arrested. Singapore must balance its principled support for international law with pragmatic foreign policy considerations.

5. Regional Stability and Security Architecture

Broader Middle East Implications

In January 2026, Israeli Prime Minister Benjamin Netanyahu said Israel will not allow Iran to re-establish its missile or nuclear programmes, while President Trump stated the US will intervene to protect protesters from state violence. This creates multiple escalation scenarios:

Military Intervention: Large-scale US or Israeli military operations against Iran would almost certainly disrupt Gulf shipping, spike oil prices, and potentially draw in other regional actors.

Regime Collapse: If protests succeed in toppling the government, the resulting power vacuum could trigger:

  • Civil war and prolonged instability
  • Refugee flows and humanitarian crisis
  • Emergence of extremist groups in ungoverned spaces
  • Regional powers intervening to shape outcomes

Status Quo with Brutal Suppression: Even if the regime survives through violent crackdown, international condemnation and potential new sanctions could deepen Iran’s isolation and economic crisis, perpetuating volatility.

Implications for Singapore’s Defense Planning

Vulnerabilities mainly arise from the economy’s dependence on its external sector, making it exposed to challenges that are sometimes beyond Singapore’s control. The Iran crisis underscores Singapore’s vulnerability to distant conflicts that can rapidly escalate.

This reinforces the importance of:

  • Maintaining strong defense capabilities and regional security partnerships
  • Diversifying energy sources and supply routes
  • Building strategic reserves and buffer capacity
  • Strengthening crisis management and contingency planning

6. Economic Growth and Investment Climate

Near-Term Economic Headwinds

Risks to Singapore’s economic growth are tilted to the downside, including a global economic slowdown, supply-chain disruptions and rising geopolitical tensions. The Iran crisis exacerbates all three:

Growth Impact: Energy price spikes and supply chain disruptions would slow economic activity. Forecasts project growth to settle at +1.6% in 2025 and +1.8% in 2026, but these projections could be revised downward if Middle East instability intensifies.

Inflation Pressures: Already managing inflation concerns, Singapore could face renewed upward pressure on prices if oil spikes above current levels.

Trade Volumes: Reduced global trade activity from higher shipping costs and economic uncertainty would directly impact Singapore’s trade-dependent economy.

Investment and Business Confidence

Geopolitical volatility demands a nuanced understanding of Singapore’s hedging strategy and its implications for regional stability. While Singapore’s strong fundamentals provide resilience, persistent geopolitical uncertainty can:

  • Delay investment decisions as businesses await clarity
  • Increase risk premiums demanded by investors
  • Complicate long-term planning for multinational corporations
  • Affect Singapore’s attractiveness as a regional headquarters location

7. Alternative Scenarios and Singapore’s Response Options

Scenario Planning

Best Case – Gradual De-escalation:

  • Protests wind down without regime change
  • International mediation prevents military escalation
  • Oil markets remain relatively stable
  • Singapore Impact: Minimal, with brief volatility quickly absorbed

Base Case – Prolonged Instability:

  • Protests continue at lower intensity
  • Intermittent disruptions to shipping and oil markets
  • Gradual economic deterioration in Iran
  • Singapore Impact: Moderate inflation pressure, increased shipping costs, modest growth drag

Worst Case – Regional Conflict:

  • Military intervention or regime collapse
  • Strait of Hormuz disrupted or closed
  • Oil prices spike above $120/barrel
  • Singapore Impact: Severe energy crisis, supply chain breakdown, recession risk

Mitigation Strategies for Singapore

Energy Security Enhancement:

  • Accelerate diversification toward LNG imports from non-Gulf sources
  • Expand renewable energy development despite space constraints
  • Strengthen regional electricity grid connections
  • Build additional strategic petroleum reserves

Maritime Route Diversification:

  • Develop alternative supply chain routes avoiding Middle East chokepoints where feasible
  • Strengthen relationships with alternative crude oil suppliers
  • Enhance maritime security cooperation with regional partners
  • Invest in port infrastructure to handle rerouted cargo

Economic Resilience Building:

  • Support industries in developing energy-efficient technologies
  • Provide targeted assistance to energy-intensive sectors during price spikes
  • Enhance social safety nets to cushion inflation impacts on vulnerable populations
  • Maintain fiscal buffers to enable countercyclical spending if needed

Diplomatic Engagement:

  • Continue active participation in international forums addressing Middle East stability
  • Strengthen bilateral relationships across the region to maintain communication channels
  • Work through ASEAN to develop collective positions on regional security
  • Support UN and multilateral efforts toward de-escalation and humanitarian protection

Broader Context: Singapore’s Structural Vulnerabilities

The Iran crisis highlights enduring challenges for Singapore:

Small State, Big Exposure

Singapore’s openness and global integration, sources of prosperity in stable times, become vulnerabilities during international crises. With trade exceeding 300% of GDP, even distant conflicts generate outsized impacts.

Energy Import Dependence

As a small economy almost wholly reliant on imported energy, Singapore faces higher energy prices whenever global supplies are threatened. Unlike larger economies, Singapore cannot fall back on domestic production.

Maritime Chokepoint Risks

Singapore itself is a chokepoint through the Malacca Strait, but its prosperity depends on other chokepoints remaining open. The Strait of Hormuz, Suez Canal, and Bab al-Mandeb all affect Singapore’s trade flows, and their simultaneous disruption would be catastrophic.

Geopolitical Exposure

As unresolved disputes and potential flashpoints remain, Singapore could face greater pressure from all sides as geopolitical contestation rises in the region. The Iran crisis exemplifies how great power competition plays out in third-party theaters, forcing small states to navigate carefully.

Historical Lessons and Forward Outlook

Learning from Past Crises

Singapore has weathered previous oil shocks and Middle East conflicts, demonstrating resilience through:

  • Strong government planning and crisis management capabilities
  • Significant financial reserves providing policy flexibility
  • Diversified economic structure reducing dependence on any single sector
  • Proactive diplomacy maintaining relationships across divides

However, Singapore’s success in staying competitive rests on its ability to remain a cohesive, multi-racial, multi-religious nation based on meritocracy. External pressures must not be allowed to undermine social cohesion.

The Path Forward

Iran’s crisis joins a constellation of challenges facing Singapore in 2026:

  • US trade war impacts, global economic slowdown, supply-chain disruptions and rising geopolitical tensions
  • Persistent inflation and elevated interest rates affecting household finances
  • Climate change imposing long-term costs and adaptation requirements
  • Technology disruption and AI transformation reshaping industries
  • Demographic pressures and labor market tightness

Against this backdrop, Singapore maintains its top AAA credit rating and strong macro-fundamentals, providing a solid foundation for weathering storms.

Conclusion

Iran’s deepening crisis presents Singapore with significant challenges across energy security, maritime commerce, regional stability, and economic growth. While direct bilateral trade is minimal, the indirect channels through which instability affects Singapore are substantial and multifaceted.

The crisis underscores Singapore’s fundamental vulnerabilities as a small, trade-dependent, energy-importing economy positioned at the intersection of global shipping routes. It highlights how distant conflicts can rapidly generate local impacts through integrated global systems.

Yet Singapore has faced such challenges before and demonstrated remarkable resilience. Success requires:

  • Proactive planning and scenario preparation
  • Diversification of energy sources and trade partners
  • Maintenance of strong defense and diplomatic capabilities
  • Preservation of fiscal strength enabling countercyclical responses
  • Protection of social cohesion against external pressures

As Lee Kuan Yew noted, Singapore must not forget the fundamentals of its vulnerabilities, and not delude itself that neighbors behave like Europeans or North Americans, but remain alert, cohesive and realistic.

The Iran crisis is one chapter in an ongoing story of how Singapore navigates an increasingly complex and contested international environment. The city-state’s continued prosperity depends on its ability to adapt, anticipate, and maintain the strategic flexibility that has served it well for nearly six decades of independence.

Note: This analysis is based on information available as of January 11, 2026. The situation in Iran remains fluid and highly unpredictable, with potential for rapid escalation or de-escalation. Singapore policymakers and businesses should continue monitoring developments closely and updating contingency plans accordingly.