The coordinated airstrikes by the United States and Israel on Iran on February 28, 2026, have triggered significant economic repercussions in Southeast Asia. While headlines focused on missiles and geopolitics, the effects of the war are now evident in fuel stations and local markets. For Malaysians and their Southeast Asian neighbors, a war occurring thousands of kilometers away is dictating cooking oil prices, diesel availability, job prospects, and growth.
The Strait of Hormuz, the narrow passage between Iran and Oman, is a vital point through which about one-fifth of the world's oil production and a significant portion of liquefied natural gas pass. When Iran attempted to close the strait, tanker movements nearly halted, leading to a shock in energy markets. Brent crude prices surged from around $70 (280 Malaysian Ringgit) to over $100 per barrel within ten days of the conflict's onset, peaking at $120.
Details of the Event
The disruptions in energy markets have extended beyond oil, as the Gulf region also produces a substantial share of fertilizers, petrochemicals, and helium, impacting agriculture, semiconductor manufacturing, and food packaging globally. Although Malaysia is not a pure energy importer, with Petronas ensuring local production capacity, approximately 69% of Malaysia's oil and condensate imports come from the Middle East.
Food manufacturers have indicated that rising diesel costs may force them to increase prices, while fertilizer companies have halted new orders, threatening palm oil production. The semiconductor sector has also expressed concerns regarding helium supplies.
Context and Background
The war in Iran highlights the vulnerability of energy reserves across Southeast Asia. Countries like the Philippines, Singapore, Thailand, and Vietnam rely on imports to meet 65% to 95% of their oil needs. Even Malaysia, considered a net energy exporter, imports 69% of its oil from the Gulf, leaving any country in the region not entirely insulated.
Governments have responded with measures similar to those taken during the COVID-19 pandemic, with the Philippines moving to a four-day workweek, while Thailand and Vietnam encouraged government employees to work from home, and Myanmar imposed alternating driving days to conserve fuel. Fuel shortages have been reported in Laos, Cambodia, and parts of Thailand.
Consequences and Impact
As China and Thailand reduce refined fuel exports, regional energy networks are under severe pressure. Vietnam has halted fuel exports, while Thailand has banned jet fuel exports. Petrochemical companies in Singapore and Indonesia have declared force majeure. ASEAN economic ministers have warned that shipping, insurance, and logistics costs are already putting pressure on food and commodity prices across the region.
Despite these challenges, Malaysians have several reasons to be thankful. While Vietnam faces a severe reserve shortage and Cambodia struggles to secure emergency fuel imports, the Malaysian government has decided to maintain the price of RON95 at 1.99 Malaysian Ringgit per liter, shielding millions from the worst effects of the price shock.
Impact on the Arab Region
This crisis demonstrates that no country can be insulated from distant conflicts. However, preparedness plays a crucial role, as the choices governments make in ordinary times dictate how well they protect their populations in extraordinary times. For Arabs, these events underscore the importance of regional cooperation in facing crises, as Arab countries can enhance their economic partnerships and reduce reliance on external energy sources.
In conclusion, the war in Iran highlights the necessity of strengthening cooperation among ASEAN countries, as building shorter and more resilient supply chains can reduce exposure to distant vulnerabilities. The lessons learned from this crisis could be beneficial for Arab nations in enhancing their capacity to face future challenges.