'This crisis won't end soon': Singapore PM warns Hormuz shutdown could spark 1970s-style stagflation

Singapore Prime Minister Lawrence Wong has warned that the prolonged closure of the Strait of Hormuz could trigger fuel shortages, rising inflation, and even a repeat of the stagflation crisis seen during the 1970s oil shocks.

In a speech on the ongoing Gulf crisis, Wong said the Strait of Hormuz had remained shut for more than two months, disrupting global energy supplies and sharply affecting Asian economies dependent on Gulf imports.

"The Strait of Hormuz has been closed for more than two months. The impact is being felt not just in higher prices but also in tightening supply," Wong said. "And here in Asia, we are especially affected because of our high dependence on energy and other critical supplies from the Gulf."

The Singapore prime minister said several countries in the region were already facing fuel shortages, while airlines had started cutting flights and factories were reporting delays. "The disruptions will not stop at energy. Fertilizer, food, and other essential inputs will be hit next. We can expect shortages in more items to emerge," he said.

Wong cautioned that even if the Strait reopens, recovery would take months because ports and energy infrastructure had been damaged, and shipping routes would need to be cleared. "Confidence must be restored that it is safe for ships to sail through, that insurance can be obtained, and people are prepared to take risks to go through the Strait. These things do not recover overnight," he said. "It will take months at least before the situation stabilizes."

The warning comes as the Iran war has pushed crude oil prices up by nearly 50% over the past two months, increasing pressure on oil-importing economies across Asia. India, which imports nearly 85% of its crude oil needs, has already begun measures to reduce foreign exchange outflows and fuel consumption.

Earlier this week, Prime Minister Narendra Modi urged Indians to delay gold purchases, cut fuel use, postpone foreign travel, and adopt work-from-home practices where possible. 

Wong warned that the economic impact of the Hormuz crisis could spread well beyond energy markets. "Globally, inflation will rise, spreading from energy to food and then other essentials. Some economies may well slip into recession," he said. 

He also raised concerns about the return of stagflation - a combination of high inflation and weak economic growth. "Older Singaporeans may remember the oil shocks of the 1970s. It was during that period that the world experienced stagflation in a major way," Wong said. "It is the worst of both worlds and deeply painful for businesses and workers."

The Singapore leader added that the International Energy Agency had warned the current crisis could become even more severe than the oil shocks of the 1970s. "So we must brace ourselves and be prepared for a more difficult period ahead," Wong said. "But amidst these realities, we can also look ahead with quiet confidence. We do not face this crisis from a position of weakness."