MALAYSIA WELL-POSITIONED TO SUPPORT REGIONAL ENERGY SUPPLY AMID MIDDLE EAST CONFLICT

By Harizah Hanim Mohamed and Nur Athirah Mohd Shaharuddin

KUALA LUMPUR, March 7 (Bernama) -- Malaysia can capitalise on the large-scale oil supply disruption caused by the conflict in the Middle East by positioning itself as a viable and more reliable energy supplier to customers in Asia, said commentator and scholar in the field of maritime and oil and gas, Nazery Khalid.

He said that Malaysia could offer to export oil and gas to China and other countries in East Asia to make up for the disruption of supply from the Gulf.

“Given our prolific hydrocarbon resources, strategic location in the heart of Southeast Asia, proximity to East Asian markets, and well-developed oil and gas infrastructure, Malaysia has what it takes to emerge as a safer and more stable source of oil and gas for China and other regional countries compared with the volatile, conflict-prone Middle East.

“We should leverage these advantages to capitalise on the region’s vulnerability,” he told Bernama when contacted.

About 78 per cent of Middle Eastern crude oil reportedly exported to China, Japan, South Korea and Taiwan passes through the Strait of Hormuz, a primary route for petroleum products exported from the Gulf countries.

According to reports, China has opened discussions with Iran to secure safe passage for crude oil tankers and vessels carrying liquefied natural gas (LNG) from Qatar through the Strait of Hormuz as the US-Israeli war on Tehran intensifies. 

Iran has indicated that only Chinese vessels will be permitted to transit the Strait of Hormuz, describing the move as a gesture of appreciation for Beijing’s support since the conflict began.

The war, which entered its seventh day on Friday, has left the critical shipping passageway virtually shut, cutting off countries around the world from nearly one-fifth of global oil and LNG supplies.

Nazery said China’s heavy reliance on imported oil from Iran explains why the country is taking steps to ensure continued energy supplies.

“The oil market is in panic mode as oil facilities in Saudi Arabia and LNG facilities in Qatar, among the world’s top producers, have been attacked, resulting in both countries halting production.

“In addition, Iran’s reported blockade of the Strait of Hormuz has led to oil and gas tankers dropping anchor in the Persian Gulf and Arabian Sea for fear of being attacked while transiting the strait,” he said.

From a supply chain perspective, Nazery said the conflict should serve as a wake-up call for China, whose dependence on Iranian oil makes it vulnerable to supply disruptions.

“For the second time in a year, China has found itself in a bind regarding its oil imports from Iran. It was in a similarly anxious position in 2025 during the 12-day war between Israel and Iran, although the flow of oil was not affected.

“With the current conflict, China must reduce its reliance on Iranian oil by diversifying its energy supply sources and exploring alternatives other than shipping to transport imported oil,” he said. 

Nazery said that the closure of the Strait of Hormuz would take a heavy toll on global oil supply.

“Alternative routes such as the East-West Pipeline of Saudi Arabia’s national oil company, Aramco, can only reroute limited volumes of oil from the kingdom’s production of around 11 million barrels per day, which accounts for about 12 per cent of global oil production,” he said.

Nazery cautioned that the oil market could react negatively, potentially pushing prices beyond US$100 per barrel, which would have serious consequences for industries, businesses, consumers and the global economy.

“Should these worst-case scenarios materialise and if there is no quick resolution to the conflict, the global economy could face shocks of seismic proportions,” he said.

Meanwhile, economist Dr Shankaran Nambiar said the severity of the conflict’s impact on the Malaysian economy will depend largely on how long the war lasts and how far it escalates.

“The consequences will be less painful if the conflict is resolved quickly,” he said.

Shankaran said that China relies heavily on Iranian oil, and any disruption could weigh on the Chinese economy, which is already facing growth challenges.

“In a more negative scenario, the impact on China’s economy could affect its trade with Malaysia. However, this would likely occur only if the conflict becomes prolonged,” he said.

Shankaran added that supply chains and logistics, particularly for goods shipped via the Strait of Hormuz, could also be affected if the strait is closed, although the direct impact on Malaysian trade would likely be limited.

He said higher oil prices, uncertainty and increased market volatility could dampen the global economy.

Shankaran said that although Malaysia’s direct trade exposure with Iran is relatively small, the broader uncertainty could still affect the domestic economy through indirect channels, albeit within manageable limits.

-- BERNAMA