West Asia Conflict Reshapes Energy Landscape, Pushes Focus Towards Energy Security

By Siti Radziah Hamzah

KUALA LUMPUR, April 26 (Bernama) -- The ongoing conflict in West Asia is reshaping the global energy landscape, underscoring that energy security for import-dependent regions is no longer about efficiency but resilience under sustained disruption.

Energy markets are once again being driven by geopolitical developments, with renewed uncertainty over supply, price volatility and investment flows.

Even if tensions ease, past crises suggest markets rarely return to their previous configuration, with structural shifts typically accelerating in the aftermath.

The risk now is not a brief disruption, but a prolonged shock that could keep markets volatile and supply tight for longer than expected.

In the Asia Pacific region, the impact is particularly pronounced, and as one of the fastest-growing centres of global energy demand, it remains heavily reliant on imports to sustain economic activity.

This dependence leaves it highly exposed to supply disruptions originating from West Asia, where a significant share of global energy flows is concentrated.

The current crisis is therefore testing the foundations of energy security in the region, extending beyond the physical movement of supply to include cost, logistics and the reliability of the broader system.

The strain is already filtering through the wider economy, with higher freight costs, supply chain disruptions and rising input prices tightening margins and weighing on trade flows.

Malaysia’s resilient position amid challenges

Moody's Ratings senior vice president and manager Christian de Guzman said that, given Malaysia’s position as a net energy exporter, the global credit rating agency does not view the country as being as exposed to supply disruptions from a closure of the Strait of Hormuz as other economies in the region.

“Rather, Malaysia’s export-led economy is more vulnerable to the potential downturn in global growth stemming from that supply shock.

“It remains to be seen whether the robust demand for electronics that buoyed Malaysia’s exports despite US tariff volatility over the past year will persist in 2026 amid the uncertainties posed by the conflict in the Middle East,” he told Bernama.

De Guzman said Moody's Ratings views the government’s subsidy retargeting efforts, including diesel rationalisation and the introduction of BUDI95, as helping to limit downside risks to the fiscal position.

“Put another way, we do not expect the subsidy bill to rise to the same degree as we had seen in 2022, when global oil prices spiked on the back of Russia’s invasion of Ukraine,” he added.

Government subsidy spending has also highlighted the public finances' exposure to energy shocks, with total subsidies surging to RM55.44 billion in 2022 from RM13.13 billion in 2021, an increase of RM42.31 billion, or 322.1 per cent.

Petroleum product subsidies accounted for the bulk of the increase, amounting to RM45.18 billion.

However, de Guzman said it remains to be seen whether additional support measures could be introduced, which may slow the pace of fiscal consolidation in the near term.

Diversification and broadening the supply for the energy mix

Diversification has come into sharper focus, as reliance on a single geographic source of supply is no longer just a weakness, but a clear point of failure.

Even oil-producing countries in Asia are not insulated when global supply is disrupted, and prices adjust, making it increasingly critical to broaden both supply sources and energy types to sustain economic stability.

At the same time, the crisis is reinforcing the importance of domestic resource optimisation, with countries placing greater emphasis on maximising indigenous energy production, particularly natural gas, while balancing the need for imports.

In the near term, gas remains central to the energy mix, with no immediate large-scale alternative capable of replacing it at a comparable speed and scale.

However, securing supply is only part of the challenge, as the industry is also confronting long project cycles that are misaligned with the urgency of current disruptions.

Supply gaps are immediate, but new supply still takes time, driving a shift towards faster execution supported by earlier collaboration across operators, service providers and partners to improve delivery timelines.

Technology is supporting this shift by improving efficiency and reducing operational risk, with advances in digitalisation and automation enabling faster decision-making and more precise resource development.

However, these do not resolve structural exposure to concentrated supply.

Collaboration vital to enhance resilience

In response, collaboration is widening beyond industry players to include governments, regulators and other stakeholders, reflecting the system-wide nature of energy security challenges.

Regional cooperation within the Asia Pacific is also gaining importance, with cross-border infrastructure, integrated systems and resource sharing increasingly seen as necessary to improve resilience.

Affordability remains a key constraint, as keeping energy flowing is one challenge, while keeping it affordable is another, with sustained price pressures beginning to spill into the broader economy through higher costs of goods, transport and production.

This is prompting calls to accelerate approvals, streamline procurement and improve cost efficiency.

Taken together, the conflict is acting as a stress test for the region’s energy system, where the immediate priority is to close supply gaps and stabilise markets, while the longer-term challenge lies in building a system that is more diversified, faster and better coordinated to withstand future disruptions.

-- BERNAMA