PETALING JAYA: Concerns are arising on the effects of the Hormuz Strait closure due to the ongoing conflict in the Middle East.
This has resulted in major disruption to shipping for all sectors, causing freight rates and charter levels to skyrocket.
Economists and analysts, however, maintained that the impact on the Malaysian economy and corporations would be limited and indirect.
The Hormuz Strait, with a width measuring only 39kms to 97kms, is the transit way for nearly one-fifth of the world’s oil and liquefied natural gas (LNG) flows.
The heightened conflict has resulted in maritime vessels having to divert to the safer but much longer Cape of Good Hope route.
Wealth management platform IPP Global Wealth, in an updated report yesterday, said because a large share of global energy supply depends on this narrow route, even limited disruptions, or the risk of them, can have significant economic consequences.
“For Malaysia, the notion of a straightforward energy windfall is increasingly misplaced.
“While higher oil and gas prices provide short-term revenue support, the dominant effect is a narrowing of policy space as inflation pressures intensify, subsidy costs rise and currency sensitivity increases,” it said.
With the flows from the Persian Gulf disrupted, Bloomberg reported that Asian buyers have turned to US barrels, while Atlantic Basin supplies have become more expensive.
The news wire said costs to hire a supertanker to ferry two million barrels of crude from the US Gulf Coast to China has risen to just over US$29mil as of March 4, doubling the cost from two weeks ago.
IPP’s investment strategist and economist Mohd Sedek Jantan told StarBiz that the impact on the domestic scene would mainly come through regional energy shipping routes rather than direct trade exposure.
“Malaysia’s import exposure to the Middle East is relatively small, accounting for less than 4% of total imports, so the direct trade impact is limited.
“However, the current tension now involves the broader Middle East region, not just Iran, and many energy shipments from producers such as Saudi Arabia, Qatar, Kuwait and the United Arab Emirates (UAE) pass through the Hormuz Strait, a key corridor supplying oil and LNG to Asia,” he said.
If shipping through this route becomes more difficult due to rising security risks, tanker insurance and freight costs typically increase, he observed, and this would raise the delivered price of crude and LNG in Asian markets.
Malaysia could still feel the impact indirectly through higher energy and logistics costs, even without a direct disruption to its trade flows, Mohd Sedek added.
In terms of the ringgit, he pointed out that although shipping costs are an important factor in global trade, they are unlikely to significantly affect Malaysia’s currency stability.
He said the ringgit is more sensitive to overall trade flows and commodity prices, particularly oil and LNG, rather than freight costs alone.
“As Malaysia is both an energy exporter and importer, higher shipping costs may raise import and logistics expenses, but this can be partly offset if higher global oil prices increase export earnings from the energy sector.
“Therefore, the net impact on the trade balance and the ringgit would depend more on movements in global energy prices than on shipping costs alone,” said Mohd Sedek.
As for corporate strategy, he believed Malaysian companies can focus on three measures, with the first being to diversify supply sources and shipping routes to reduce dependence on any single corridor.
“Secondly, strengthen supply-chain resilience by keeping strategic inventories and securing more flexible logistics arrangements. Third, use basic risk-management tools such as longer-term contracts or hedging to manage volatility in energy and freight costs,” he said.
A research director at a foreign brokerage said the ongoing oil shipping challenges at the Hormuz Strait due to Iranian threats, attacks on vessels and insurance withdrawals have driven global tanker freight rates to record levels, with very large crude carriers (VLCC) rates exceeding US$400,000 a day on key Asia routes.
“This has amplified energy price volatility, with Brent crude surging toward US$80 a barrel, higher bunker fuel costs, war-risk surcharges, and broader logistics disruptions,” she said.
For context, VLCC are ocean-faring vessels that transport two million barrels of crude per voyage.
“Malaysia, as a net oil and gas exporter but reliant on imports for refined products and integrated into global supply chains, experiences mixed impact, with short-term gains overshadowed by cost pressures and risks in a prolonged scenario,” she said.
The research director said while higher global crude prices could boost upstream revenues for companies such as Petroliam Nasional Bhd (PETRONAS), elevated logistics and freight costs could hit exporters hard.
“Cost-push inflation from pricier fuel, energy inputs, and imported goods including refined petroleum, raises production and transport costs for manufacturing and households, straining subsidies and potentially eroding consumer spending.
“Concurrently, manufacturers face higher input costs and weaker demand if major export markets such as the United States, Europe and China slow from global energy volatility.
“Logistics firms deal with disrupted flows and capacity issues, while energy players outside upstream see offset gains from costlier imports,” she added.
While also conceding that a prolonged disruption could cloud the 2026 outlook for Malaysia’s gross domestic product growth, the country’s strong domestic fundamentals will offer some buffer.
The research director suggested corporates lock in forward freight and shipping contracts, negotiate bunker adjustment clauses, and stress-test supply agreements to curb volatility.
Diversify sourcing to non-Middle East suppliers where feasible and build inventory buffers for critical inputs.
She said sustained high disruption would likely prompt more active government interventions to protect growth and corporations, and the situation remains fluid.
“De-escalation could quickly ease pressures,” she noted.
Chief economist for the Asia-Pacific region at Coface Bernard Aw concurs with the notion that the impact on Malaysia could be mixed, as he opined: “Malaysia should be less vulnerable to supply shocks but exposed to global energy price risks.
He said higher energy prices could benefit upstream and LNG revenues, while downstream refiners may see compressed margins if product prices do not rise in tandem with global crude prices because of higher feedstock costs and potential operational shutdowns.
Aw explained that higher shipping costs will increase Malaysia’s import bill, resulting in an increase to industrial production costs, especially for products linked to energy and transportation.
Any energy windfall for Malaysia may therefore be diluted by its role as a manufacturing hub reliant on imported inputs, he noted.
“While higher oil prices may support export earnings and government revenue, which would help the ringgit, higher shipping costs, and potentially weaker global demand can weigh on imports and supply-chain reliability.
“The net effect is any gains in the ringgit may be capped by potential supply disruptions and rising domestic cost pressures,” he said.
