At its narrowest point, the Straits of Hormuz is a mere 39km-wide waterway.
To put it in perspective, that is narrower than the distance from the eastern to the western side of Singapore (approximately 50km) – an area that is hardly noticeable on the world map.
And yet, a blockage of this tiny waterway is all it takes to take global trade down to its knees.
Just over this weekend, this vulnerability became a live crisis: after a fleeting attempt to reopen the waterway last week, a renewed military standoff has once again choked off the flow of 20 million barrels of oil per day, sending Brent crude prices surging back towards the US$100 mark.
Nonetheless, here are some signals investors can watch for to ride out the storm.
Energy Supply & Price
Around 20% of global oil supplies are transported through the narrow Straits of Hormuz.
Thus, a disruption in this narrow waterway instantly creates an acute squeeze on global oil supply, directly hitting aviation businesses that are notoriously fuel-hungry.
This means local aviation darlings of SIA (SGX: C6L) and SATS (SGX: S58) will take the brunt of the impact.
Still, it’s not a losing game for everyone.
Especially for energy companies, which could enjoy short-term benefits amid this crisis, though the duration of such a windfall remains uncertain.
Global Inflation Favours Cash-Rich Businesses
The downstream impacts of rising oil prices put inflationary pressures on everything from rising electricity bills to soaring food prices.
Remember in 2022 when the Fed hiked interest rates after COVID to combat rising inflation?
While the rate-hiking cycle has wound down in recent years, if inflation flares up again, further hikes are not off the table.
Even if the Fed doesn’t hike rates again, the current already heightened rates are likely to hold longer than expected.
This “higher-for-longer” monetary policy could spell trouble for debt-ridden companies.
As cheaper debt matures, these companies face potentially higher refinancing rates, putting pressure on their bottom line, on top of other inflated costs just to keep their lights on.
For investors, it makes sense to trim these positions and lean more towards cash-rich companies to maintain a leaner portfolio.
Defence Businesses are Riding a Tailwind
With the global rules-based order increasingly fragmented, countries are fending for themselves more than ever.
Companies that supply national security capabilities have attracted strong investor interest and government contracts alike.
Local defence-linked companies like Singapore Technologies Engineering Ltd (SGX: S63), or STE, have seen prices rising amid these crises.
The industrial blue chip’s ascent is backed by its strong recent performance of rising revenue and profits, supported by rising revenue visibility through its robust order books derived from sticky government-linked defence contracts.
While its profile as Singapore’s well-known defence provider helps in riding the defence-related tailwind, STE’s revenue is also diversified across other civilian domains like Commercial Aerospace (CA), Urban Solutions and Satcom (USS), providing additional stability.
Through STE, investors aren’t just getting growth opportunities from the defence tailwinds, but also revenue resilience and a proven track record of dividend payouts.
Singapore is Looking Attractive to Investors
Amid global tensions like the Russia-Ukraine conflict and Middle East tensions that started even before Operation Epic Fury in Iran, Singapore is looking attractive to investors again.
After all, how can investors overlook Singapore when the government is actively supporting businesses with an S$1 billion support package, benefiting businesses like Sheng Siong (SGX: OV8) and Frasers Centrepoint Trust (SGX: J69U).
To ease immediate cash flow pressures, the government has boosted the corporate income tax rebate to 50% for 2026 and expanded the Energy Efficiency Grant to cover all business sectors.
Furthermore, the decision to pull forward S$500 in CDC vouchers to June is expected to drive significant footfall into heartland retail, providing a direct lift to essential service providers.
This is a stark contrast to other countries that are scrambling to keep their economies afloat.
As investors seek to diversify away from the increasingly uncertain and overvalued US market, Singapore’s stability offers just what they are looking for – an oasis in a turbulent investing climate.
Singapore Offers Consistency in Business Support
Investors who think the S$1 billion support package is just a one-off gesture will be pleasantly surprised to know that MAS’s S$5 billion Equity Market Development Programme (EQDP) for local equities was rolled out back in early 2025, even before the recent oil crisis.
The scheme seeks to deepen investor participation in Singapore-listed equities by channelling capital through selected fund managers.
For investors, this means a more robust market ecosystem underscored by greater capital flow, leading to clearer valuations and better investment opportunities.
Moreover, many of these companies offer defensive resilience for your portfolio amid market volatility, and not to mention the dividends that you can receive while waiting for the storm to pass.
Get Smart: Narrow Chokepoint, Wide Impact
The blockage of the Straits of Hormuz is a result of a broader shift in a more volatile geopolitical climate.
This crisis sounded an important alarm that the global market is more vulnerable than most investors might have assumed.
As global rules are being rewritten, investors might be better served with astute positioning rather than attempting to predict short-term market direction.
Strong balance sheets, indispensable offerings, and clear competitive advantages are key factors that characterise a resilient portfolio – one that can ride out the storm stronger than ever.
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Disclosure: Larry L. owns shares of FCT.
