Keppel warns of ‘second-order’ shocks from prolonged Middle East conflict

[SINGAPORE] Keppel has warned that while its direct exposure to the Middle East remains limited, an escalation in regional conflict could trigger significant “second-order” effects on global energy prices and the international economy.

In a series of responses to shareholders’ questions ahead of its 58th annual general meeting on Friday (Apr 17), the global asset manager noted on Apr 11 that its operations in Qatar and Saudi Arabia have not been directly affected by ongoing hostilities. 

“So far, our operations and maintenance of the Domestic Solid Waste Management Centre in Qatar, the investment by Keppel Infrastructure Trust (managed by Keppel) in a Saudi Arabia gas pipeline and our rig charters in Saudi Arabia have not been directly impacted,” said the company in a bourse filing. 

However, the mainboard-listed company cautioned that “the second-order effects in terms of the impact on gas supply, energy prices and the international economy bear close watching”.

“If there is prolonged disruption to gas supply and an energy crunch, this could have significant impacts on Singapore and the region. Keppel would also be affected,” the global asset manager said.

“There could also be broader macroeconomic effects, including cost inflation, higher interest rates, among others,” it added.

Energy hedging and pass-throughs

To mitigate these risks, Keppel highlighted that its gas supply is diversified via piped natural gas from Malaysia and international liquefied natural gas cargoes. 

As at end-2025, about two-thirds of its electricity contracts are long term and hedged, providing what the company describes as “some cushioning against spark spread volatility”.

Keppel also stated that the impact from higher energy prices is “not expected to be significant, as more than 95 per cent of data centre leases are on power pass-through contracts, covering customer electricity bills”.

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Additionally, it noted that “the US tariffs and changes in the global economic order are contributing to a more fragmented and uncertain operating environment”.

“So far, the direct impact of the tariffs on Keppel has been relatively limited, as Keppel is not engaged in the manufacturing or export sectors,” the company said.

It added that there may even be opportunities for the company, as investors’ preference for defensive, cash-flow generative assets would drive demand for alternative real assets in infrastructure and private credit.

China property market, private credit concerns

Separately addressing concerns regarding the Chinese property market, Keppel noted it has reduced its residential landbank exposure from S$3.1 billion at the end of 2017 to about S$900 million as at end-2025. 

Looking ahead, the group is pursuing a “China-for-China” strategy, partnering domestic capital to “selectively invest in opportunities with a focus on achieving quality risk-adjusted returns”.

Management also sought to distance itself from recent challenges in the private credit market. Unlike open-ended funds with exposure to sections facing disruptions, Keppel noted that it runs a “close-ended private credit fund series where investors are locked-in for eight to 10 years”, and that the series is “doing well”.

The company also confirmed it has sold its entire 5 per cent stake in Seatrium as at Apr 1, realising a total value of S$429 million. 

Meanwhile, the divestment of its M1 telco business remains pending regulatory approval, with the parties agreeing to extend the long-stop date to May 21.

Keppel noted that it reached S$95 billion in funds under management (FUM) as at end-2025 and is on track to achieve its FUM target of S$100 billion by the end of 2026, if not earlier.

The counter closed at S$12.08 on Monday, S$0.05 or 0.4 per cent lower.