U.S. Blockade in Strait of Hormuz Affects Global Trade and Oil Flows

Singapore views both the United States and China as partners. U.S. entities represent the largest share of foreign investments in Singapore, with American multinational enterprises investing $467.6 billion in 2024. The U.S. trade surplus with Singapore reached $3.6 billion in 2024, a 91.5% increase from 2024’s $1.7 billion, according to U.S. Trade Representative data.

Singapore exported $58.8 billion worth of goods to China in 2023, marking its largest trade partnership with that country. Singapore Foreign Minister Vivian Balakrishnan stated that the country does not need to choose between the two nations.

Balakrishnan described the events in the Strait of Hormuz as a possible dry run for a future conflict in the Pacific between the U.S. and China. He said Singapore is positioned to benefit from developments in both countries but noted the risk if their relationship fractures.

“The main danger is: That relationship fractures if they go to war in the Pacific. What you’re witnessing now in the Strait of Hormuz is just a dry run." — Singapore Foreign Minister Vivian Balakrishnan (@FortuneMagazine). Balakrishnan added that Singapore would assess actions based on its long-term national interests and refuse to choose sides. He stated the country would say no to Washington or Beijing if necessary, without influence from the other party.”

Iran has proposed tolls on ships passing through the Strait of Hormuz to generate revenue, which legal experts say would violate the UN Convention on the Law of the Sea. Such tolls could set a precedent for the Strait of Malacca, a 500-mile waterway near Singapore that carries about 30% of the world's traded goods.

Singapore, Malaysia, and Indonesia have a cooperative mechanism to avoid collecting tolls in the Strait of Malacca, as it aligns with their interests as trade-dependent nations. Balakrishnan said Singapore would not participate in attempts to close, interdict, or impose tolls in the area and would guarantee transit passage for everyone.

An Indonesian finance minister stated that Indonesia is considering levies on vessels through the strait to monetize the chokepoint. Thailand's government is advancing plans for a landbridge connecting the Indian and Pacific oceans to bypass the Strait of Malacca.

The daughter of the Malaysian prime minister and deputy president of the People’s Justice Party criticized Balakrishnan's decision not to negotiate with Iran for access to the Strait of Hormuz. She cited international law on trade route passage and noted Malaysia was among a select few countries granted toll-free passage through the Strait of Hormuz by Iran.

She said in a statement earlier this month that Malaysia will not be lectured on the merits of engagement.