This article first appeared in Forum, The Edge Malaysia Weekly on June 15, 2026 – June 21, 2026
We are in crisis mode, and Malaysians must bite the bullet. That was the central message of my previous article (Issue 1623, April 20) on the Middle East crisis and the Israeli-led US-Iran war that erupted on Feb 28.
Now, more than 100 days into a conflict that has lasted longer than anyone had predicted, economically speaking, things will undoubtedly become even tougher for us.
While the much-anticipated FIFA World Cup, running from June 11 to July 19 across the US, Canada and Mexico, may serve as a fleeting distraction, the socio-economic pain will gradually creep in during the second half of the year, as prices of goods and services escalate. By then, greater pressure on the cost of living would be acutely felt.
How long this suffering will persist — and whether it will spill over into the first and second quarters of 2027 — depends entirely on how swiftly a peace deal can be reached to restore free passage for shipping through the Strait of Hormuz.
This critical chokepoint, which Iran closed on March 4 and has since reopened and reclosed as the strain fluctuated in the current ceasefire, has already triggered a cascading effect on the global economy.
What began as an energy crisis — cutting off 20% of global energy trade, comprising 20 million barrels per day (bpd) of crude oil and petroleum products, along with a potential 88 million tonnes per annum (mtpa) of liquefied natural gas (LNG) from Middle Eastern producers and exporters — has since evolved into a severe supply chain disruption.
The Strait of Hormuz is also the passageway for 46 mtpa of fertilisers (35% of global trade), 32.5 mtpa of polymers (9%-15% of global capacity), 6 mtpa of aluminium (8% of global output) and 63 million cubic metres of helium (33% of global output).
The shortage of these essential products has now adversely impacted seven major sectors: energy and utilities; chemicals and petrochemicals; transport, shipping and logistics; heavy manufacturing and metals; agriculture and food production; automotive and technical components; and consumer retail, luxury goods, medical supplies and semiconductors. These seven core sectors, in turn, exert supply chain pressure on more than 30 other industries.
A peace that could begin to ease this strangulated supply chain hinges very much on the unpredictable mood of US President Donald Trump. He can end — or prolong — this crisis, essentially at his own whim and fancy.
On June 9, he claimed that a peace deal with Iran was in its final stage. On June 10, he asserted that Iran “took too long to negotiate and will now pay the price”. In between those statements came an Iranian drone attack that downed a US Apache helicopter, met swiftly with US retaliatory strikes on Iranian military targets and infrastructure.
Iran countered by launching missiles and drones against US bases in Jordan, Kuwait and Bahrain, while the US maintained relentless military pressure. Iran then decided to shut the Strait of Hormuz once again. Meanwhile, Israel continued its invasion of Lebanon and the killing of Hamas fighters and civilians in Gaza.
As I finish writing, Trump threatens that the US will hit Iran extraordinarily hard, seize Kharg Island, and assume total control of Iran’s oil and gas markets. But on June 12, Trump cancelled the strikes and added that a peace deal was close.
Although a swift resolution remains technically possible, my assessment is that a comprehensive peace deal — one that ends the attacks on Gaza and Lebanon and renders the Strait of Hormuz completely passable — is still a distant prospect.
Right now, it seems there is no urgent impetus for immediate peace, because the three main protagonists — the US, Israel and Iran — each believe that time is on their side to manoeuvre for the most advantageous deal possible.
For the US, despite the bellicose talk of annihilating Iran having long since faded, Trump can still afford to play the waiting game to carve “his graceful exit”. He dragged the nation into a war that was supposedly short and would have lasted a week but the pressure back home was not severe enough to force him to end the conflict immediately.
While Americans are paying more for petrol and diesel and witnessing rising prices for goods and services, the broader economy has not collapsed. The high price of crude oil and gas, including LNG, has actually benefited the US economy as America is now a net exporter of crude oil and petroleum products and the world’s largest LNG exporter.
Despite a recent significant downturn in the US stock market — driven by renewed inflation concerns and steep sell-offs in major technology and artificial intelligence (AI) stocks — the market remains firmly positive for the year so far. The closure of the Strait of Hormuz and the financial fallout from the Middle East war have not yet inflicted sufficient economic damage on Trump.
For Israel, there is no pressing need to end the war at all. On the contrary, Israel wants the conflict to continue indefinitely so that it can inflict maximum destruction on the military structures of Hamas in Gaza and Hezbollah in southern Lebanon, and continue bombing the capital city of Beirut. Israel remains arrogant and indifferent to world opinion.
It can continue behaving this way because Prime Minister Benjamin Netanyahu and his ultra-right-wing government believe they can still persuade Trump and the US Congress to maintain their support. Even as more Americans — including Trump’s own Make America Great Again supporters — grow angry with Israel, Tel Aviv remains confident that Trump and US foreign policy will always adopt an “Israel first” stance.
For Iran, the simple fact that it has survived more than 100 days against the mightiest militaries in the world — the US’ and Israel’s — alongside the killing of its top clergy and military leadership, is in itself a victory. The regime change that Israel led the US to believe would occur within a week has not materialised, and the popular revolution it hoped to trigger has remained muted.
Iran’s economy is in dire shape, but the Iranian Revolutionary Guard Corps (IRGC), which keeps the clerical regime in power, remains intact. As the war drags on, with ever more non-military infrastructure destroyed and civilians killed — including schoolchildren — the very idea of regime change has dissipated.
The IRGC, though militarily weakened, still wields enormous influence over the opening of the Strait of Hormuz. Political morale will receive a significant boost if Iran performs better than co-host US at the World Cup.
Even if the war were to end and the Strait of Hormuz fully reopen soon, the entire supply chain disruption could take up to a year to return to normalcy. First, clearing the bottleneck of about 130 tankers carrying 160 million barrels will require three months. Drawing down stockpiles, restarting production and repairing damaged facilities will take many additional months.
Inventories in Singapore, Southeast Asia’s regional hub for oil, are already at a 13-year low.
Ready to face the more difficult phase?
Since the conflict began, Prime Minister Datuk Seri Anwar Ibrahim and his Cabinet members have been forthright about the crisis. While many things remain manageable, they have asked Malaysians to brace for difficult times as the global energy and supply chain crisis enters its next 100 days. The impact will be felt in stages: beginning with fuel and logistics costs, then spreading to petrochemical feedstocks, plastics, fertilisers, manufacturing and construction.
Tan Sri Mohd Hassan Marican, chairman of the crisis management task force under the National Economic Action Council, warned in a Bernama interview: “Eventually, it will reach households through broader cost-of-living pressures. This is why Malaysia must continue strengthening buffers — not only for fuels but also for food, medical supplies, industrial inputs and logistics capacity.”
Early mitigation efforts have ensured sufficient crude oil and petroleum product supplies until July. The price of petrol RON95 and diesel remains heavily subsidised, although monthly fuel subsidies have swollen from RM700 million to between RM5 billion and RM7 billion monthly, depending on the price of crude. This has placed severe constraints on the government’s subsidy budget.
Since the war started, crude oil prices have fluctuated between US$77 and US$140 per barrel. The Brent benchmark currently hovers around US$85 per barrel. Escalating shipping and insurance costs have added an extra US$10 to US$20 per barrel before oil even reaches the refineries.
Oil prices are expected to remain high and one industry estimate indicates that Brent crude will only return to its pre-war price of US$77 per barrel in 2029.
Yet, the price of RON95, which is consumed by the majority of households, remains at RM1.99 per litre compared to the unsubsidised rate of RM3.72 a litre. Since the crisis, under the Budi subsidy scheme, the monthly quota for Malaysians with driving licences has been reduced from 300 litres to 200 litres. The government has stated there will be no further quota cuts unless oil prices surge above US$200 per barrel — an unlikely scenario for now. The subsidised diesel control system also remains intact.
To secure supply, efforts are underway to diversify crude oil sources away from the Middle East to include Russia, Türkiye and the African nations, as well as LNG from the US. On the energy supply front, therefore, things appear under control.
Other cost-mitigation measures already in place for the public include continued and expanded cash assistance through Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (Sara), alongside strategic food supply interventions via Jualan Rahmah Madani and Agro Madani. In addition, RM15 billion in financial support has been allocated for micro, small and medium enterprises to help businesses manage rising costs. However, such assistance alone will not be sufficient to contain the full impact of the crisis.
On June 11, the Federation of Malaysian Manufacturers warned that the war had morphed into lasting commercial damage. The cost absorption is no longer merely a challenge but has resulted in real commercial loss.
That is why overcoming this crisis is no longer the responsibility of the government alone; it requires national discipline and coordination across the government, industry and the public. Hassan said: “This is not a challenge any single institution can manage alone. It demands a whole-nation approach.”
As the crisis deepens, further government assistance will follow, but one thing all Malaysians — households, private sector and public sector — must do is to make the jimat (saving) culture a daily practice. Reducing wastage is absolutely key, alongside plugging leakages that arise from smuggling and corruption.
Malaysians must save on fuel, electricity and water usage because the subsidy element has made our per-capita consumption of these utilities among the highest in the region. We still use vast quantities of treated water to wash cars and water plants, rather than sourcing it from rainwater-harvesting facilities, for example.
Food wastage is another glaring problem. It is estimated that around 10% of food in Malaysia is lost at the distribution stage before it even reaches consumers. Each Malaysian throws away about 260kg of food a year and a staggering 8.3 million tonnes of food is discarded annually.
Embracing the jimat culture can help reduce the subsidy burden, which is unsustainable if the crisis drags on. If there is a gradual increase in the pump price of RON95 and diesel, or a further reduction of quotas for higher-income drivers, there should be no complaints.
The whole-nation approach requires full support from Malaysians — from both the public and private sectors. Hassan says this should reflect the spirit of berat sama dipikul, ringan sama dijinjing (for all to share burdens through thick and thin).
This is the right path. And as we navigate these difficult times, Malaysians should also learn to be grateful. This crisis is a true test of our national grit.
Azam Aris is an editor emeritus at The Edge
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