PETALING JAYA: A severe disruption to the Strait of Malacca could push Malaysia’s inflation above 3% and slow economic growth to as low as 2.5% in 2027, from the current forecast of 4.5%, warns Apex Securities Research.
The research house said the Strait posed a significant risk to Malaysia given the country’s heavy dependence on maritime trade.
Citing data from the Statistics Department, Apex Research said maritime transport accounted for approximately 48% of Malaysia’s total trade in 2025.
“Based on the location and throughput of Malaysia’s major ports, we estimate that up to 36.8% of total trade could be directly affected should shipping through the Strait of Malacca be significantly disrupted,” it said in an economics and market outlook report titled If the Strait of Malacca Shuts Down.
The figures show that the potentially affected trade could represent about 77% of Malaysia’s maritime trade.
“We view this as a tail-risk scenario rather than our base case, but one investor should not ignore,” it noted.
The Strait of Malacca is also one of the world’s major oil transit chokepoints, carrying around 23.2 million barrels per day (bpd) of crude oil and petroleum products in the first half of 2025, equivalent to 29.1% of global seaborne oil trade and 22.2% of global oil supply, according to Apex Research.
The research house said a disruption to the waterway could therefore trigger a sharp increase in global oil prices, with Brent crude potentially rising towards US$120 per barrel.
“The main risk to Malaysia’s inflation outlook comes from the extent of adjustments in domestic fuel prices, which account for 5.7% of the consumer price index basket,” it said.
Apex Research currently assumes Brent crude prices of US$85 per barrel in 2026 and US$80 per barrel in 2027.
While Apex Research forecasts Malaysia’s inflation at 2% in both 2026 and 2027, it said an average Brent crude price of US$95 per barrel or higher could push headline inflation above 3%, “warranting closer policy attention”.
“For simplicity, we assume the government maintains a partial fuel subsidy (at US$80 per barrel), while any additional increase in Brent prices would be reflected in domestic fuel prices,” it said.
Unlike recent tensions in the Middle East that have primarily affected global energy prices, a disruption to the Strait of Malacca Apex Research said would directly hit Malaysia’s trade flows, supply chains and overall economic activity, making it one of the country’s most significant geopolitical vulnerabilities.
“The Strait of Malacca is not merely one of the world’s busiest shipping lanes—it is the backbone of Malaysia’s external trade,” Apex Research said.
It said the Strait is particularly critical to Malaysia as the country’s major ports – including Port Klang, Port of Tanjung Pelepas, Penang Port and Johor Port – are strategically located along or connected to the waterway.
While alternative shipping routes exist through the Indonesian archipelago, Apex Research said they are generally less efficient, resulting in higher freight costs, longer transit times and increased logistical complexity.
“For an export-orientated economy like Malaysia – particularly for time-sensitive industries such as electronics and electrical, manufacturing and commodities – even temporary disruptions could interrupt production schedules, delay deliveries and weaken export competitiveness,” it said.
Apex Research currently forecasts Malaysia’s gross domestic product (GDP) to grow 4.5% in 2027 but said a disruption to the Strait would pose significant downside risks to the outlook.
Under a mild disruption scenario, involving up to 50% disruption to shipping, with authorities continuing to allow a significant proportion of commercial vessels to transit through the Strait to minimise disruption to global trade, Malaysia’s GDP growth would moderate to around 3.5%, Apex Research said.
“Under a moderate disruption scenario, where 51% to 75% of shipping is disrupted and commercial vessels face greater restrictions, with priority given to essential goods, energy supplies and strategic cargo, GDP growth could slow to between 3.1% and 3.5% in 2027,” it added.
Under a severe disruption scenario, where 76% to 100% of shipping is disrupted and a prolonged geopolitical standoff results in a near-complete closure of the Strait, Apex Research said Malaysia’s GDP growth could slow to between 2.5% and 3.1%, particularly if the disruption is prolonged.
Furthermore, Apex Research said the scenario highlighted the vulnerability of global trade to disruptions at key maritime chokepoints, noting that recent disruptions in the Red Sea and Suez Canal had already forced vessels to reroute, increasing freight costs, insurance premiums and delivery times.
