Malaysia is likely to remain in cautious mode in the second half of 2026 as uncertainty surrounding the reopening of the Strait of Hormuz continues to push oil prices higher, with the evolving fuel supply situation expected to shape the country’s inflation outlook and weigh on business and consumer spending.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said uncertainty over when the strategic shipping route would fully reopen is expected to keep upward pressure on crude oil prices.
He said the availability of fuel supplies and the government’s ability to continue absorbing higher subsidy costs would be key factors determining the country’s inflation trajectory going forward.
“The shortages of fuel supplies and the need for the Malaysian government to provide fuel subsidies will determine the evolving outlook on the inflationary trend going forward,” he said.
According to Afzanizam, prolonged supply uncertainty is likely to create anxiety among businesses and households, directly influencing spending decisions as consumers and companies become more cautious.
Although traffic volumes have so far remained largely business-as-usual, he said this raises concerns over how quickly fuel stockpiles can be replenished should supply disruptions persist.
He warned that the impact of any prolonged oil and gas supply shortage would extend well beyond the energy sector.
Oil and gas products are widely used in the production of plastics, fertilisers, petrochemicals, synthetic fibres, tyres, PVC pipes, paints and numerous other manufactured goods, meaning supply shortages could trigger a cascading effect across multiple industries and supply chains.
Afzanizam said strengthening the country’s resilience will require coordinated efforts, including promoting work-from-home (WFH) arrangements to reduce fuel consumption, accelerating the transition towards renewable energy, increasing the adoption of electric vehicles (EVs), and encouraging businesses to remain nimble in responding to rapidly changing operating conditions.
He also pointed to rising producer costs as an early warning sign of broader inflationary pressures.
Malaysia’s Producer Price Index (PPI) increased 4.1% month-on-month in March, the sharpest monthly rise since 2015, driven largely by higher fuel prices.
Afzanizam expects businesses to eventually pass these higher operating costs on to consumers in order to preserve profit margins, resulting in higher prices across the economy.
“All in all, it’s going to be cautious mode in the second half of 2026,” he said.
