Middle East conflict stalls SREITs despite strong earnings: analysts

With Singapore oil prices hitting an all-time high, fears of sticky inflation are forcing markets to price in higher-for-longer rates.

Heightened instability in the Middle East remains a significant threat to Singapore Real Estate Investment Trusts (SREIT), a sector that has struggled to recover even in the face of positive year-end earnings.

In its latest sector analysis, UOB Kay Hian Research said that the risk the sector faces is an “economic downturn caused by uncertainties from prolonged Middle East conflict and elevated energy prices.”

Whilst Singapore’s economy grew by 4.6% in the first quarter (Q1) of 2026, the Ministry of Trade and Industry expects the US-Israel-Iran conflict, which escalated at the end of February, may affect economic activity in the coming quarters.

The International Energy Agency also said in its Oil Market Report - April 2026 that the middle distillate prices in Singapore have reached all-time highs above $368 per barrel (US$290 per barrel) amidst the ongoing conflict.

“The SREIT sector has been clobbered since the onset of the Middle East conflict, despite generally encouraging results reported for the second half of 2025,” the UOB read.

“Rising energy prices have revived concerns that inflation could remain sticky, prompting markets to scale back expectations for rate cuts and even pricing in a small probability of rate hikes,” it added.

The Monetary Authority of Singapore has announced a tightened monetary policy, whilst also raising core inflation and CPI-all items inflation projections to 1.5% to 2.5% from 1.0% to 2.0% previously.

UOB Kay Hian, meanwhile, said that some of the market catalysts are a resilient economy accompanied by low domestic interest rates, and limited new supply for office, retail and data centre segments in Singapore.

CGS International said in another report that SREITs may deliver stable operating performance in the upcoming Q1 results season. Markets will focus on management commentary on demand trends, rental reversions, and debt cost guidance, alongside the impact of higher oil prices on inflation expectations and interest rate outlook for 2026.

Per sector, UOB Kay Hian said logistics, industrial and hospitality REITs are the most affected.

“The potential healing in the energy supply chain across Middle East and Europe would diminish the threat from higher inflation. We see current depressed unit prices for S-REITs as an opportunity to bargain hunt,” it noted.

For CGS International, industrial REITs remain relatively insulated from higher energy costs due to pass-through structures and hedging. Meanwhile, hospitality REITs are expected to post higher RevPAR in Q1, supported by stronger early-year visitor arrivals.