Prolonged economic stress likely even if Iran war eases, says economist

2026-03-26 - 04:50

The ongoing West Asia conflict has disrupted oil supply via the Strait of Hormuz which will take time to normalise, according to economist Samirul Ariff Othman. (AFP pic) PETALING JAYA: Malaysians should brace for a prolonged period of oil market stress, even if the ongoing West Asia conflict eases soon, warns an economist. The caution follows the government’s announcement of early intervention steps in response to escalating tensions. Samirul Ariff Othman. Samirul Ariff Othman, an adjunct lecturer at Universiti Teknologi Petronas, said the real challenge for Malaysia lies not just during the period of conflict but for the entire length of time it would take for global energy systems to recover. “The central issue is not whether tensions escalate or de-escalate, but the time lag between disruption and recovery,” he said, adding that even if hostilities ease and shipping lanes reopen, the global oil system would not simply “switch back on.” Samirul explained that oil markets depend on interlocking systems – tanker availability, maritime insurance, port access, refinery configurations and supply contracts. “When a chokepoint such as the Strait of Hormuz is disrupted, these systems fragment simultaneously. Prices react immediately, but physical supply normalisation takes far longer.” He noted that even if oil continues to flow, costs could rise sharply due to tanker risks, war-risk premiums, rerouting and higher freight charges. This would feed directly into fuel prices, increase the government’s subsidy burden under BUDI95, and push up electricity, transport, logistics and food costs. “In this sense, the real shock is not just supply loss, but price amplification through risk premiums.” Samirul pointed to early signs of strain across the Asia-Pacific, citing petrol station closures and flight risks in the Philippines, fuel shortages in parts of Australia, and Air New Zealand’s cancellation of some 1,100 flights due to jet fuel shortages. “These are not yet full-scale crises – but they are early-stage stress indicators of a tightening supply system,” he said. He welcomed Putrajaya’s early intervention measures to safeguard Malaysia’s economic resilience. At a special meeting chaired by Prime Minister Anwar Ibrahim yesterday, the National Economic Action Council (MTEN) agreed to diversify energy sources, explore alternative shipping routes and strengthen supply resilience. Samirul described MTEN’s proposed measures as “directionally correct,” but cautioned that they were “medium-term mitigations”. “Structural realities – geography, refinery design, and global market integration – cannot be reconfigured overnight,” he said, adding that public-facing measures such as fuel conservation were necessary. “They are part of demand-side management to stretch available supply during system stress.” “Energy security is no longer just about reserves or production,” said Samirul. “It is about resilience across the entire supply chain, and that takes time to rebuild.”