Singapore is experiencing an influx of safe-haven capital, driven by investors seeking stability amid the Iran conflict. Data released by the Monetary Authority of Singapore on Thursday showed that foreign deposits in the city-state’s banks climbed to S$659 billion (approximately US$515 billion) in March, the highest level since records began in 2021. Khoon Goh, Head of Asia Research at ANZ, noted, "Although the source of deposits is not broken down, a significant portion of the increase is likely due to safe-haven inflows to Singapore resulting from the Middle East conflict. Given that there is no sign of resolution in the Middle East conflict, non-resident funds may continue flowing into Singapore."

The same trend is reflected across various asset classes. Despite pressure on global fixed-income markets from rising oil prices and expectations of a more hawkish Federal Reserve, Singapore government bonds have outperformed most peers. The Singapore dollar has also depreciated by 1.3% against the U.S. dollar but has fared better than other Southeast Asian currencies. A renewed surge in oil prices above US$120 per barrel has put pressure on more vulnerable currencies such as the Indonesian rupiah, Philippine peso, and Indian rupee.

Singapore’s equity market has demonstrated resilience as well. The Straits Times Index is only about 3% away from its all-time high. While some investors have flocked to artificial intelligence-related stocks, driving South Korea’s index to record highs, Singapore remains an attractive portfolio diversification option, offering more defensive, income-generating investments. Davy Tsang, Head of Rates Investor Sales for Asia ex-Japan at Citigroup, commented, "We are seeing increased safe-haven interest from investors in Singapore dollar-denominated asset allocations. This time, the safe-haven playbook has changed—the era of seeking gold or the yen is over."

Singapore’s policy framework has further enhanced its appeal. The Monetary Authority of Singapore uses the exchange rate, rather than a benchmark interest rate, as its primary tool for managing inflation. Its recent policy tightening, implemented through a steeper slope of the policy band, has reinforced expectations of a stronger Singapore dollar, attracting fresh capital inflows. This has resulted in ample market liquidity and pushed short-term rates near their lowest levels in nearly four years. Brian Lee, an analyst at Maybank Securities, expects rates to decline further, forecasting that the three-month Singapore Overnight Rate Average could reach 0.85% by year-end. The rate currently stands at 1.02%, according to Bloomberg-compiled data.

However, strong safe-haven inflows may complicate policymaking. Since the Monetary Authority of Singapore does not directly control interest rates, excess liquidity could depress borrowing costs more than anticipated, loosening financial conditions and potentially exerting upward pressure on inflation. Authorities possess tools to manage this issue and have historically absorbed large capital inflows without causing major disruptions. When funds surge, the Monetary Authority of Singapore can absorb excess liquidity—for example, by issuing its own bills or conducting money market operations—to prevent short-term rates from falling excessively.

Analysts expect safe-haven demand for Singapore to persist as long as geopolitical risks remain elevated. The Middle East conflict, now in its ninth week, carries further escalation risks following reports that U.S. President Donald Trump is set to be briefed on new military options against Iran. Brian Lee of Maybank stated, "Against a backdrop of heightened geopolitical turbulence, Singapore’s certainty premium and stability are increasingly standing out. We believe investor interest in Singapore as a safe haven will continue to grow."