Singapore’s top diplomat warned that the economic fallout from the war in the Middle East could worsen and that financial markets likely haven’t fully priced this in.
Vivian Balakrishnan, the city state’s foreign minister, gave the assessment at an Investment Management Association of Singapore (IMAS) conference last week.
“I’m quite sure the markets are not fully pricing the worst case scenario,” he said during a fireside chat at the conference on April 7. “How’s that for a note of soberness?”
Five days before Israel and the US attacked Iran on February 28, Singapore’s benchmark stock index set a new record high of 5,041, bolstered by a slew of government measures rolled out throughout 2025 to revitalise the market. The index has since held steady at around the 4,900 mark.
Balakrishnan, whose warnings of economic consequences of the war echo those of Prime Minister Lawrence Wong, pointed out that Asian nations are especially exposed because a substantial share of energy shipments that pass that through the Strait of Hormuz is bound for the region.
He noted that higher energy prices are fuelling concern among global central banks about inflation “stickiness” because of the spillover into food and transport costs, as well as the impact on artificial intelligence, which uses massive amounts of energy.
Despite Asia’s vulnerability, Balakrishnan also highlighted the region’s growth potential, and stressed the importance of multilateralism and the need to double down on regional integration, including intra-Southeast Asian trade and investment flows.
“We do need to seek safety in numbers,” he said in his opening remarks at the conference.
AI risk
AI was also a theme of discussion at the conference.
Luke Soon, an AI leader in digital solutions at PricewaterhouseCoopers Singapore, warned of the “unappreciated risk” of overtrusting the technology.
He said it’s critical for the financial investment industry to be able to work through problems using AI as a tool.
“As a matter of principle, humans should always come first,” Soon said at a panel discussion on AI as a catalyst for change. He expects businesses that have replaced jobs by adopting AI to be forced to re-hire people.
According to the findings of an annual IMAS survey of asset managers in Singapore released in January, AI adoption has increased and deepened, with 53% of respondents using the technology in investment processes such as generating research insights and commentaries. Around 94% said the technology has enhanced productivity.
