How Singapore's blue chips weathered the first full trading week of the US-Iran conflict, and what an investor might consider for a core-satellite portfolio going forward.
A Week of Reckoning
The week of 2 to 6 March 2026 delivered one of the sharpest tests of investor nerve that the Singapore market has seen in years. On 28 February, US and Israeli forces launched coordinated strikes on Iran, killing the country's Supreme Leader and senior military commanders. Tehran responded with retaliatory missile attacks on Gulf states hosting US military installations, and the Strait of Hormuz, through which roughly 20 per cent of global oil supply flows, came to an effective standstill as marine insurers withdrew war risk cover for vessels in the region. Brent crude surged by as much as 13 per cent to above US$82 a barrel, while jet fuel prices in Singapore hit record levels. The Straits Times Index, which had flirted with the historic 5,000 mark just days earlier, fell 104 points or 2.1 per cent on the first trading day of the week before staging a partial recovery over the following sessions.
The Excel data covering 2 to 6 March captures this turbulence in granular detail across all 30 STI constituents and the SPDR Straits Times Index ETF. What the numbers show is not a market in freefall, but rather a market making difficult and deliberate choices about which sectors deserve a premium, which deserve patience, and which now carry risks that simply were not there a fortnight ago.
The Headline Numbers
The SPDR STI ETF declined from $4.892 on Monday to $4.852 by Friday, a modest 0.8 per cent pullback that masks considerable intra-week volatility. Trading volumes spiked across the board, with many counters recording volumes two to four times their three-month daily averages. DBS Group saw its volume reach 3.2 times the average, while Singapore Airlines recorded 4.4 times and SATS 4.4 times, reflecting the heavy re-pricing activity in sectors directly exposed to the conflict.
At the sector level, the Excel data reveals a clear bifurcation. Communication services led all sectors with a 1.8 per cent gain for the week, driven entirely by Singtel. Consumer defensive names eked out a 1.5 per cent average gain, buoyed by a strong 6.9 per cent move in DFI Retail Group. At the other end of the spectrum, real estate names fell an average of 1.9 per cent, utilities declined 3.2 per cent (Sembcorp Industries), and industrials dropped 1.3 per cent on aggregate, though this masked enormous dispersion within the sector.
Defence and Aerospace: ST Engineering Stands Apart
The most striking single-stock story of the week belongs to Singapore Technologies Engineering, which rose 6.8 per cent from $10.25 to $10.95 even as the broader market retreated. The Excel data shows the stock closing within 2 per cent of its 52-week high, with analyst consensus placing it firmly in "buy" territory. This move reflects a confluence of structural and cyclical factors that position ST Engineering as a standout beneficiary of the current geopolitical environment.
ST Engineering entered the week carrying significant momentum. It had won $18.7 billion in new contracts in FY2025, of which $9.1 billion came from its defence and public security segment, including a contract for the new Titan 8x8 infantry fighting vehicle for the Singapore Army. On 3 March, the company announced a five-year maintenance contract worth EUR315 million from the Qatari army. More importantly, the company's management has stated that global defence spending is undergoing a "structural change" that is unlikely to wane even if current conflicts subside, pointing to NATO members' pledge to commit 5 per cent of GDP to defence by 2035.
Singapore's own defence budget supports this narrative. The government projected a S$24.9 billion defence expenditure for 2026, a 6.4 per cent increase, with the development allocation rising approximately 19 per cent year-on-year. Defence Minister Chan Chun Sing told Parliament that Singapore needs a strong and capable defence "more than ever" amid a worsening geopolitical climate. For ST Engineering, which operates across aerospace, defence, and smart city solutions, this combination of rising domestic and international order flow provides visibility that few other STI components can match.
The Banks: Steady Hands in Choppy Waters
Singapore's three banks, which together account for roughly half of the STI's index weight, held up reasonably well during the week, though all three ended lower. DBS Group declined 1.1 per cent from $55.63 to $55.00, OCBC eased 0.5 per cent from $20.93 to $20.82, and UOB dipped 0.6 per cent from $36.30 to $36.07. In the context of a week that saw crude oil spike by double digits and Middle Eastern airports shut down, this resilience says something important about how the market views these institutions.
The Excel data places DBS on a forward price-to-earnings ratio of 13.3 times, OCBC on 11.7 times, and UOB on just 9.9 times. All three trade above their 200-day moving averages and well above their 52-week lows. Dividend yields range from 4.0 per cent for OCBC to 5.6 per cent forward for DBS, figures that compare very favourably against Singapore government bond yields and fixed deposit rates. DBS Group Research has guided for FY2026 dividend yields of 6.1 per cent for DBS, 5.4 per cent for OCBC, and 5.4 per cent for UOB, underpinned by CET1 ratios well above regulatory requirements and growing fee income from wealth management.
The primary risk for the banks from the Iran conflict sits not in their direct exposure but in the second-order effects. Should oil prices remain elevated and feed into sustained inflation, the rate-cutting cycle that markets had been anticipating could stall or even reverse. Nomura has already flagged Singapore as one of the Asian economies most likely to tighten monetary policy in an oil shock scenario. Higher-for-longer rates would support net interest margins, which is positive for bank profitability, but could also dampen loan growth and weigh on asset quality, particularly in real estate-linked portfolios.
Airlines: Singapore Airlines Under Pressure
Singapore Airlines recorded the second-largest decline among STI stocks during the week, falling 2.8 per cent from $6.84 to $6.65. This is hardly surprising given the scale of aviation disruption unleashed by the conflict. The airline cancelled flights to and from Dubai through at least 7 March, while Middle Eastern airspace closures forced rerouting of Asia-to-Europe flights, adding 60 to 90 minutes of flying time per sector and increasing fuel burn on every affected service. Jet fuel prices hit an all-time high in Singapore during the week.
The Excel data shows SIA trading on a forward PE of 16.1 times with a trailing dividend yield of 5.3 per cent, which on the surface appears attractive. However, the analyst consensus mean of 3.3 (on a scale where 1 is a strong buy and 5 is a strong sell) makes it the least-favoured STI stock among sell-side analysts. OCBC Group Research noted that higher oil and insurance prices will pressure margins, and that prolonged airspace closures could lead to sustained cost increases. With SIA's fuel hedging ratios typically running at 40 to 50 per cent for 12 months forward, the airline has meaningful exposure to any sustained move higher in crude. An investor would likely view SIA as a stock to revisit once the conflict picture clarifies, rather than one to accumulate during the uncertainty.
REITs: The Yield Paradox
Real estate investment trusts were among the hardest-hit sectors during the week, with an average decline of 1.9 per cent across the STI's REIT constituents. CapitaLand Ascendas REIT fell 3.4 per cent, CapitaLand Integrated Commercial Trust dropped 3.3 per cent, and Mapletree Logistics Trust shed 3.1 per cent. The sell-off appears driven by two overlapping concerns: first, the prospect that the Iran conflict could stall or reverse anticipated interest rate cuts, thereby removing a key catalyst for the sector's recovery story; and second, a broader risk-off rotation away from yield-sensitive instruments toward safe-haven assets.
Yet the Excel data also reveals that many S-REITs now trade at dividend yields that are difficult to ignore. Mapletree Industrial Trust offers a 6.5 per cent trailing yield, Frasers Logistics and Commercial Trust yields 6.2 per cent, Mapletree Logistics Trust yields 6.0 per cent, and Mapletree Pan Asia Commercial Trust yields 5.7 per cent. Several trade below their book values, suggesting that the market is pricing in a degree of pessimism that may prove excessive if the conflict remains contained. DBS Group Research has noted that S-REITs are entering a multi-year earnings upgrade cycle for 2026 and 2027, supported by refinancing tailwinds as SORA has fallen to around 1 per cent. The complication is that this thesis assumes rates continue to fall, an assumption that the Iran conflict has now called into question.
Singtel: The Quiet Climber
Singtel gained 1.8 per cent during the week to close at $5.00, making it the third-best performer among STI stocks. The move attracted less attention than ST Engineering's rally, but it reflects an equally compelling structural story. Singtel has spent the past year reinventing itself as a digital infrastructure play, with its Nxera data centre arm building a 58MW facility in Tuas that is due to come online in 2026 and is already more than half pre-sold. The company partnered with KKR in a landmark deal announced on 4 February 2026 to acquire full ownership of ST Telemedia Global Data Centres for S$6.6 billion, one of the largest digital infrastructure transactions in Southeast Asian history.
On 3 March, Singtel announced a strategic collaboration with Ericsson to accelerate the deployment of 5G Advanced, positioning Singapore's network as an AI-powered platform for enterprise transformation. The Excel data shows Singtel trading on a forward PE of 24.4 times, which reflects the market's willingness to pay up for the data centre and AI growth narrative rather than treating the company as a traditional telco. Analyst consensus firmly favours the stock, with a mean recommendation of 1.6 and target prices clustered around S$5.10 to S$5.75. In a market rattled by geopolitical shocks, Singtel's domestic focus, secular growth drivers, and defensive revenue streams make it a natural port in the storm.
The Effects of War on STI Stocks
The Iran conflict's effects on the STI can be understood through three transmission channels. The first and most immediate is energy costs. Singapore imports virtually all of its energy, and any sustained increase in crude oil and LNG prices feeds directly into business operating costs and consumer inflation. The Excel data shows Sembcorp Industries, Singapore's largest listed utility, falling 3.2 per cent during the week despite being an energy producer itself, suggesting that the market views higher input costs as a net negative even for companies with some upstream exposure. Singapore Airlines, with its heavy fuel dependency, is the most directly affected counter.
The second channel is trade disruption. The Strait of Hormuz's effective closure, even if temporary, disrupts shipping lanes and raises freight costs. SATS, the ground and cargo handling company, fell 1.1 per cent during the week, though OCBC Group Research sees it as a potential beneficiary of redirected trade flows due to its diversified network. Yangzijiang Shipbuilding, which one might expect to benefit from higher shipping demand, instead fell 5.4 per cent, the worst performer in the index, as investors worried about broader supply chain disruption and the company's high beta profile.
The third channel is the defence spending tailwind. As discussed earlier, ST Engineering is the clearest beneficiary, but the broader defence procurement cycle also supports Seatrium through naval contracts and, indirectly, Singapore Exchange through increased derivatives trading activity as institutional investors hedge risk. SGX's volume spike of 2.5 times its three-month average during the week underscores this dynamic. The longer the conflict persists, the more structurally embedded these defence and risk-management tailwinds become.
Stocks That May Rise in the Coming Weeks
Any assessment of near-term price direction carries inherent uncertainty, particularly in a market grappling with an active military conflict. That said, the Excel data combined with the prevailing macro backdrop points to several names with favourable risk-reward profiles.
ST Engineering remains the most compelling momentum story. Its order book visibility, structural tailwinds from global rearmament, and domestic defence budget support give it a growth trajectory that is largely independent of the broader economic cycle. The stock's proximity to its 52-week high, ordinarily a reason for caution, is in this case a reflection of genuine earnings momentum rather than speculative excess.
Singtel's digital infrastructure pivot positions it to benefit from secular demand for AI compute capacity and data centre services, a trend that is unaffected by Middle Eastern geopolitics. The stock's re-rating from a traditional telco to a digital infrastructure name remains in its early stages, with substantial earnings growth expected as Nxera's new capacity comes online.
Among the banks, UOB offers the most attractive valuation at 9.9 times forward earnings with a price-to-book of just 1.2 times, the lowest among the three local lenders. Its ASEAN-focused growth strategy and strong capital position provide downside protection, while a forward dividend yield approaching 4 per cent offers income while an investor waits for the geopolitical fog to clear.
For yield-oriented investors willing to accept near-term volatility, CapitaLand Integrated Commercial Trust and Mapletree Pan Asia Commercial Trust offer forward dividend yields of around 5 per cent and 5.7 per cent respectively, trading below book value with strong institutional backing and analyst buy ratings. The recovery thesis for S-REITs has been complicated by the Iran conflict's potential impact on the rate-cutting cycle, but it has not been invalidated.
Building a Core-Satellite Portfolio
An investor seeking to construct a portfolio from the STI constituents in the current environment might consider a core-satellite approach that balances income stability against thematic upside, while managing exposure to the elevated geopolitical risk.
The core holdings, which should form the bulk of the portfolio, would prioritise steady dividend income, strong balance sheets, and proven resilience across market cycles. DBS Group, as the market leader with the highest ROE at 15.9 per cent and a forward dividend yield of 5.6 per cent, anchors this group. UOB, with its lower valuation and disciplined ASEAN growth strategy, provides a complementary banking exposure. CapitaLand Integrated Commercial Trust, with its diversified portfolio of retail and commercial assets, a 4.9 per cent trailing yield, and a price-to-book below 1.1 times, offers dependable real estate income. Singapore Exchange, while trading on a higher PE multiple of 25 times, provides unique exposure to rising trading activity driven by market volatility and benefits from its near-monopoly position.
The satellite holdings, which should represent a smaller allocation,
would target stocks with higher growth potential and more concentrated
thematic exposures. ST Engineering sits at the top of this list,
offering a direct play on the global defence spending cycle with the
added benefit of its commercial aerospace division, which profits from
the same MRO demand that airspace disruptions accelerate. Singtel
provides exposure to the AI and data centre megatrend through its Nxera
arm, combined with a defensive telco base. For investors with a higher
risk tolerance, Mapletree Pan Asia Commercial Trust offers a compelling
value and yield combination at a price-to-book of just 0.8 times with a
5.7 per cent dividend yield, while Keppel DC REIT provides exposure to
the data centre theme within a REIT structure, carrying an analyst
consensus of 1.5 (strong buy).
Looking Ahead
The coming weeks will be defined by two variables that no amount of fundamental analysis can predict with certainty: the trajectory of the Iran conflict and the Federal Reserve's response to the oil-driven inflation impulse at its mid-March FOMC meeting. Oxford Economics has assessed that the conflict is unlikely to last beyond two months, while analysts at Citibank have projected a near-term Brent trading range of US$80 to US$90 per barrel with tail risks up to US$120 under a prolonged scenario. OCBC Group Research maintains an "Overweight" position on Singapore equities, viewing Singapore as a potential safe haven amid global geopolitical tensions.
The FTSE Russell quarterly review, announced on 6 March 2026, confirmed that the STI's 30 constituents will remain unchanged, with revisions only to the reserve list. This provides index stability at a time when investors need it. Singapore's GDP grew 4.8 per cent in 2025 and the MAS expects growth to remain resilient this year, while the unemployment rate held steady at 2 per cent in the fourth quarter. These domestic fundamentals, combined with the SGD's traditional safe-haven characteristics and the ongoing Equity Market Development Programme fund deployment, provide a floor beneath valuations.
For investors with a medium-term horizon, the current pullback in quality names offers an opportunity to build positions at more attractive entry points than were available even a fortnight ago, when the STI was knocking on the door of 5,000. The key is to be selective, to favour companies with structural growth drivers or deeply entrenched competitive positions, and to ensure that the portfolio's income stream provides adequate compensation while the geopolitical situation unfolds.
References
[1] Business Today Malaysia; "SGX Opens Higher As Bargain Hunting Follows Global Volatility"; 03 Mar 2026
[2] CNBC; "Middle East conflict poses fresh test to central banks as oil shock fuels inflation"; 04 Mar 2026
[3] NPR; "Oil prices surge, but no panic yet, as Iran war continues"; 02 Mar 2026
[4] CNN; "Surging energy prices and threats to shipping. How the Middle East war could hurt the global economy"; 06 Mar 2026
[5] CNN; "Oil surges and stock futures sink as war in Iran threatens crude supply"; 01 Mar 2026
[6] Fortune; "Asian aviation stocks plunge as Iran conflict forces airlines to cancel flights over Middle Eastern airspace"; 01 Mar 2026
[7] ts2.tech; "STI flirts with 5,000: Yangzijiang and AEM set the pace on SGX in the week ahead"; 01 Mar 2026
[8] OCBC Group Research via Minichart; "Singapore Market Outlook March 2026: Top Stock Picks, STI Movers and Analyst Insights"; 03 Mar 2026
[9] OCBC Group Research via Minichart; "Middle East Tensions: Impact on Singapore Equities, Oil, Defence and Aerospace Stocks"; 04 Mar 2026
[10] Bloomberg; "Singapore Projects Nearly $20 Billion Defense Spend This Year"; 27 Feb 2026
[11] The Edge Singapore; "ST Engineering expects to repeat doubling of international defence contract wins this FY2026"; 27 Feb 2026
[12] Defense News; "Singapore inks deal for ST Engineering's Titan 8x8 vehicle"; 04 Feb 2026
[13] Janes; "Singapore announces defence budget increase"; 13 Feb 2026
[14] The Edge Singapore; "ST Engineering debuts new solutions across aviation, defence and smart city at Singapore Airshow 2026"; 02 Feb 2026
[15] Business Today; "SGX Opens Higher Amid Middle East Tensions And Global Oil Surge"; 05 Mar 2026
[16] TipRanks; "FTSE Russell Leaves Straits Times Index Constituents Unchanged, Revamps Reserve List"; 05 Mar 2026
[17] DBS Group Research via Minichart; "Asia REITs Outlook 2026: Opportunities in Singapore, Hong Kong, China and Thailand Amid Lower Rates and Market Volatility"; 05 Mar 2026
[18] Reuters via CNBC Africa; "Rising fuel prices lash airline sector as Iran conflict widens"; 05 Mar 2026
[19] CNN; "The hole in the sky: How Middle East airspace closures are reshaping global aviation"; 02 Mar 2026
[20] Channel NewsAsia; "Commentary: How the war in Iran could impact global economy, including Singapore"; 06 Mar 2026
[21] Ericsson; "Singtel and Ericsson accelerate 5G Advanced"; 03 Mar 2026
[22] Dr Wealth; "DBS, OCBC and UOB 4Q25 Results: Good or Bad? Have Banking Stocks Peaked?"; 26 Feb 2026
[23] Oxford Economics; "The 2026 Iran War, An Initial Take and Implications"; 02 Mar 2026
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