Iran-Israel Conflict Poses Limited Economic Risk To Malaysia - CIMB Securities

KUALA LUMPUR, June 18 (Bernama) -- The Iran-Israel conflict poses limited direct economic risk to Malaysia, given the country’s minimal trade exposure to the region and historical evidence that oil price surges linked to conflicts tend to be short-lived, according to CIMB Securities Sdn Bhd.

The key tail risk lies in a sustained military escalation, particularly if it disrupts the Strait of Hormuz or draws in major global actors like the United States (US) or other regional powers, it said in a note today.

“Such a scenario could trigger significant shocks to global energy markets, with broader spillover effects. If this situation does materialise, it will weigh on Malaysia’s current 2025 gross domestic product (GDP) growth forecast of 4.0 per cent,” it said in a note today.

CIMB Securities said Malaysia’s direct trade exposure to the Middle East remains small. Just 2.2 per cent of its total trade is with Middle Eastern economies, while trade with Iran accounts for a mere 0.09 per cent.

“In the short term, Malaysia may benefit from improved terms of trade if oil and liquefied natural gas (LNG) prices remain elevated, given its role as a net exporter of these commodities,” said CIMB Securities.

It also noted that historically, oil prices have reacted sharply to conflicts in the Middle East, particularly those involving Iran. Recent episodes suggested these effects tend to be short-lived.

“Iran produces around four million barrels per day (bpd) of oil, about 4.6 per cent of global output, placing it well behind major producers like Saudi Arabia, Russia, and the US.

“As a result, disruptions linked to Iran typically cause volatility (to oil price) but have a relatively modest and short-lived impact on overall supply dynamics,” it noted.

Furthermore, the research firm said a more serious — although still low-probability risk —  stems from the potential closure or disruption of the Strait of Hormuz, a critical maritime chokepoint for global energy flows.

“The strait handles roughly 20 per cent of the world’s crude oil and 30 per cent of global LNG shipments. Although Iran has repeatedly used the threat of closing the Strait of Hormuz as a geopolitical bargaining chip, the credibility of such threats remains low.

“The move would be economically and strategically self-destructive — and both regional and global actors are well-prepared to counter any attempt,” it added.

-- BERNAMA