Developments in the Middle East have so far primarily affected Singapore’s inflation, rather than its growth, the Monetary Authority of Singapore (MAS) said in its latest macroeconomic review on Monday (Jul 27). Core inflation, which rose in Q2, is expected to step up and stay elevated for some time before a discernible easing in H2 2027. MAS noted that while a re-escalation in tensions could pose upside risk to inflation, its negative impact on growth would be outweighed by the boost from strong artificial intelligence demand in the near term. The review was released hours after MAS moved to raise the slope of the Singdollar nominal effective exchange rate policy band very slightly. MAS stated that shipping volumes through the Strait of Hormuz will likely take several quarters to return to pre-conflict levels, but activity at Singapore’s ports has been relatively resilient. In Q2 2026, the Middle East conflict posed a drag on oil-related sectors, but its economic impact was more than offset by robust activity in technology-related segments. Oil-related industries as a whole contracted by an estimated 11 per cent on year in Q2, though oil-related re-exports to Malaysia and Indonesia rose markedly.