Over the past few weeks, tensions in Iran unfolded in an intense, multi-front geopolitical standoff, sending shockwaves around the global economy.
The blockage of the Strait of Hormuz has deranged the supply of not just oil and liquefied natural gas (LNG), but also petrochemicals, helium, plastic materials, fertilisers and aluminium.
Prices surge, and multiple industries are grappling with the potential of prolonged disruptions.
What does the Iran war mean for Malaysia’s plastic market, energy security and corporate ESG strategies beyond the immediate supply and price concerns?
This crisis may be a turning point for recycled plastics, enhancing their competitiveness relative to virgin materials, said the Malaysian Plastics Manufacturers Association (MPMA).
“Contrary to common perception, recycled plastic in Malaysia has long been priced on par with, and at times lower than, virgin plastic. What the Strait of Hormuz crisis has done is blow that gap wide open,” it told StarESG.
With the prices of virgin plastics surging sharply, the cost of recycled plastics – made mostly from industrial scrap and collection waste – does not move in the same way with oil prices, it added.
For domestic recyclers that have long struggled to find consistent buyers willing to pay a fair price for their materials, MPMA pointed out that the ongoing crisis may be exactly the push needed to close the gap.
At the same time, the crisis is reshaping how alternative energy sources are viewed.
Associate Professor Dr Zul Ilham Zulkiflee Lubes, who is the principal fellow and director at the Institute of Islamic Understanding Malaysia (IKIM)’s Centre for Science and Environment Studies, opined that the narrative around biofuels is shifting from climate commitments to energy security.
While biofuels are not the primary solutions, they still play an important supporting role, especially when serving as a practical substitute for imported oil in hard-to-electrify sectors, such as heavy transportation and aviation, he said.
In the near term, however, rising energy prices are expected to exert significant pressure on corporate balance sheets, prompting a tactical reprioritisation of resources, noted Professor Dr Lee Khai Ern.
The Research Centre for Sustainability Science and Governance head at Universiti Kebangsaan Malaysia’s Institute for Environment and Development added that historically, discretionary sustainability investments tend to be deferred during periods of acute cost escalation.
“Evidence from the crises shows a shift towards operational survival, with companies prioritising liquidity preservation, fuel hedging and supply chain stabilisation over long-term decarbonisation initiatives,” he said.
Firms are gravitating towards cost-saving sustainability measures, such as energy efficiency initiatives like work from home and energy saving mandates, rather than transformational investments, he added.
Virgin versus recycled plastics
The shortage of polyethylene terephthalate (PET) resin is affecting operations across sectors.
A local dairy brand has switched from plastic bottles to paper cartons and ultra-high temperature (UHT) packaging, while plastic manufacturers have increased prices to offset higher input costs.
While MPMA expects the supply of raw material to ease relatively quickly if the Strait of Hormuz reopens, it said the current crisis should be Malaysia’s wake-up call to reduce dependence on imported raw material.
Nearly half of Asia’s naphtha – the key input for plastics – flows through this checkpoint. “That single bottleneck, now effectively shut, has exposed just how vulnerable we are.”
In response, MPMA supports accelerating the rollout of the Extended Producer Responsibility (EPR) scheme, which makes brand owners accountable for collecting and recycling their packaging.
Although voluntary in 2026 and set to become mandatory by 2030, the current crisis strengthens the economic argument for faster implementation, it said.
The association also recommended setting minimum recycled content requirements for packaging to create stable demand for recyclers.
However, structural constraints remain. Malaysia does not collect enough plastic waste, and the quality of collected materials is uneven, creating a “chicken-and-egg” problem.
Without reliable input, recyclers cannot produce material that manufacturers trust; and without demand, recyclers cannot invest in better equipment, it explained.
“Adding to this challenge is a structural reality that is often overlooked: Malaysia’s population simply is not large enough to generate sufficient plastic waste to sustain the entire domestic recycling industry on its own,” it elaborated.
As a result, recyclers depend on both local and imported feedstock, but imports remain tightly controlled to prevent Malaysia from being a dumping ground.
Looking ahead, MPMA cautioned that virgin plastics may regain their cost advantage when the conflict ends and oil prices stabilise.
It stressed that lasting policy measures, such as EPR fees and recycled content mandates, are essential to ensure that recycling remains competitive in the long run.
Scaling beyond palm oil
To strengthen energy resilience, Malaysia must address bottlenecks in biodiesel scale-up, said Assoc Prof Zul Ilham, who is also employed at the Institute of Biological Sciences at Universiti Malaya’s Faculty of Science.
Currently, only B10 is available nationwide, with B20 implemented in certain regions such as Sarawak, Labuan and Langkawi. Expanding to B30, while challenging, should be a priority, he said.
The Plantation and Commodities Ministry, through the Malaysian Palm Oil Board, has introduced an 18-month pilot project on the use of B20 palm-based biodiesel for ground service vehicles at Kuala Lumpur International Airport (KLIA).
Assoc Prof Zul Ilham suggested replicating the pilot project to a broader range of fleets, including government vehicles, buses and waste trucks.
Beyond scaling, he is advocating a shift in strategy from “palm oil first” to “waste first” to avoid tensions between fuel and food supply.
“My only worry is that we rely heavily on one commodity – palm oil – as a single feedstock, especially when it is an edible oil,” he said.
For a start, Assoc Prof Zul Ilham recommended mandating the registration of waste cooking oil from large food service
providers and introducing incentives for household collection.
At present, much of this waste-based feedstock is exported, and Malaysia needs a domestic reservation mechanism to retain these resources and move up the value chain by exporting higher-value biodiesel instead, he said.
The biodiesel production licences should also be tied with certification in sustainability standards, especially feedstock traceability, to strengthen export prospects, Assoc Prof Zul Ilham said.
Compliance to resilience
The sectors most exposed to the Iran war include aviation and logistics, agriculture and chemicals, and construction, according to UKM’s Prof Lee.
Elaborating, he said aviation and logistics are focusing on immediate fuel hedging rather than scaling sustainable aviation fuel (SAF), while the surge in the prices of petrochemicals, used in modern green building materials, could potentially delay sustainable infrastructure projects.
“This creates a risk of short-term carbon lock-in, as companies revert to more emissions-intensive pathways under economic pressure,” he said.
While the short-term outlook suggests a temporary slowdown, Prof Lee said history has seen energy crises serving as catalysts for structural transformation.
The 1973 Organisation of Petroleum Exporting Countries (Opec) oil embargo, for instance, institutionalised mandatory efficiency through Corporate Average Fuel Economy (CAFE) standards and building insulation standards, he said, adding that the 1979 Iranian Revolution triggered nuclear power pivots, most notably in France.
The 2022 Russia-Ukraine war, meanwhile, boosted renewable energy deployment in Europe.
“The Iran war is currently forcing a leap towards total industrial resilience through circular, bio-based petrochemicals and the mass adoption of decentralised onsite microgrids,” Prof Lee observed.
Will green transition stall?
A key question remains: Will green transition be put on the back burner amid rising costs and supply uncertainty?
“Stepping back from sustainability now would be the worst possible response to the crisis,” said MPMA.
Noting that companies that have invested in recycling, local sourcing and circular economy practices are better cushioned at the moment. MPMA said they are not panicking in the same way as those who depended entirely on overseas raw material.
The crisis has exposed the vulnerability of overdependence on imported raw materials, it stressed.
“Building a stronger recycling industry at home is not just good for the environment. It is simply good business sense.
“Our commitment to transitioning to net zero carbon emissions and achieving circularity goals by 2050 has not changed – it is now more urgent than ever.”
For corporate Malaysia, while segments of the industry may retreat into a defensive posture in the next 12 to 24 months, Prof Lee said the overarching insight is that resilience is becoming the new sustainability.
The crisis is expected to accelerate the decoupling of value chains from fossil fuels, embed sustainability into core risk management, and reinforce the transition towards local, renewable and circular systems, he said.
“In this sense, the 2026 Iran conflict may ultimately be remembered as a pivotal inflection point, marking the end of the era of ‘cheap and reliable oil’ and the consolidation of sustainability as a fundamental pillar of corporate resilience.”
