KUALA LUMPUR: Malaysia’s short-term economic impact is expected to remain manageable, despite the impasse in United States (US)-Iran peace talks, said economists.
IPPFA Sdn Bhd investment strategy director and country economist Mohd Sedek Jantan said the outlook is supported by oil shipments that have already transited the Strait of Hormuz, providing an estimated two-month supply buffer.
"Growth may face some moderation, yet the impact can be cushioned if the government effectively contains cost-push inflation from being passed through to consumers, thereby sustaining private consumption as the main growth anchor.
"We maintain our forecast released in February, reflecting confidence that existing buffers remain intact," he told Bernama.
Reports said that US-Iran negotiations failed to reach an agreement on Sunday after hours of talks in Islamabad, the capital of Pakistan, prompting US President Donald Trump to announce a blockade of the Strait of Hormuz.
Subsequently, the US Central Command (CENTCOM) announced that it will implement a blockade of all maritime traffic entering and exiting Iranian ports on April 13 at 10 am ET (1400 GMT).
Despite the blockade, Prime Minister Datuk Seri Anwar Ibrahim said last Friday that one of seven ships previously stranded in the Strait of Hormuz had safely passed through the waters and is now heading to Malaysia, while six more ships have received approval and are waiting for their turn to pass through the important trade route.
In this regard, Mohd Sedek said the development is anticipated to help cushion immediate disruptions to domestic economic activity, although cost pressures are likely to rise amid ongoing global uncertainties.
Compared with other Asian economies, he said Malaysia is in a stronger position, but it is not fully insulated from geopolitical spillovers.
Echoing Mohd Sedek's views, Universiti Utara Malaysia Economic and Financial Policy Institute senior associate fellow and associate professor Irwan Shah Zainal Abidin said Malaysia’s gross domestic product (GDP) growth forecast of four to five per cent for 2026 remains intact despite the ongoing external uncertainties.
He said Malaysia's trade and investment, especially foreign direct investment (FDI), will not be heavily affected for now.
"This is due to the structure of the economy, where trade and investment destinations are not concentrated in the conflict area.
"Furthermore, policy clarity is also a plus point. Under the MADANI economic framework, especially the National Industrial Master Plan (NIMP 2030) and the 13th Malaysia Plan (13MP), as well as the soon-to-be-announced Johor-Singapore Special Economic Zone (JS-SEZ) masterplan, this will further boost the investment climate," he said.
Near-Term Oil Spike Above US$120 per Barrel Unlikely
On the impact of crude oil prices from the US blockade of the Strait of Hormuz, Mohd Sedek said markets have become increasingly headline-driven, with any new developments likely to trigger swift price movements.
However, he said a sharp near-term spike in benchmark Brent crude oil prices to above US$120 per barrel (US$1= RM3.9695) appears unlikely, as the situation remains within a fragile ceasefire with signs of controlled escalation rather than full disruption.
The strategic objective behind the Trump blockade is not to fully shut global energy flows, but to counter Iran’s control over transit tolls and pressure Tehran economically, while allowing broader maritime passage to continue, he said.
"In my view, this does not necessarily point to a return to full-scale war, but rather a shift towards a new non-negotiated status quo, where Iran retains influence over the strait without securing sanctions relief, while the US steps back from direct conflict, leaving uncertainty over whether Israel continues military engagement independently," he said.
Targeted Assistance, Gradual Fuel Price Adjustment Among Measures to Sustain Economy
On the government’s role in sustaining economic growth, Mohd Sedek said it is crucial to strengthen the resilience of key sectors, particularly when external shocks drive up costs, which are eventually passed on to consumers through higher prices or absorbed by firms through lower margins.
He opined that policy intervention should aim to minimise the pass-through to consumers, especially for essential sectors, to contain inflation and protect purchasing power.
"This can be achieved through targeted subsidies, tax relief, or cost-sharing mechanisms, allowing firms to absorb part of the shock without severely compressing margins," he said.
He added that the government, at the same time, can also direct commercial banks to provide financial support, including working capital facilities and liquidity assistance, to ensure businesses remain operational and resilient, striking a balance between preserving business viability, maintaining price stability and sustaining domestic demand.
Strike A Balance Between Protecting Households and Preserving Fiscal Sustainability
Mohd Sedek cautioned that the government should strike a careful balance between protecting households and preserving fiscal sustainability amid current economic conditions.
Taking fuel subsidies as an example, he said maintaining RON95 at RM1.99 per litre for an extended period would significantly strain public finances and risk more abrupt adjustments in the future.
"While the current 200-litre cap is a sensible approach, the government should consider a gradual adjustment of the subsidised price to around RM2.20 per litre, which remains manageable at roughly a 10 per cent increase.
"At the same time, expanding targeted cash assistance to existing beneficiaries under programmes such as Sumbangan Asas Rahmah (SARA) via MyKasih would help cushion the impact on lower-income groups," he said.
Irwan Shah, on the other hand, said for now, maintaining the subsidy programmes is key, but if the war continues, stimulus packages may be necessary.
"A mini budget can be introduced, like what we did back in 2009," he added. - Bernama
