Kuala Lumpur: 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.

According to BERNAMA News Agency, 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 or other regional powers. Such a scenario could trigger significant shocks to global energy markets, with broader spillover effects. If this situation does materialize, it will weigh on Malaysia’s current 2025 gross domestic product (GDP) growth forecast of 4.0 percent.

CIMB Securities noted that Malaysia’s direct trade exposure to the Middle East remains small, with just 2.2 percent of its total trade conducted with Middle Eastern economies, and trade with Iran accounting for a mere 0.09 percent. 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.

The firm also highlighted that historically, oil prices have reacted sharply to conflicts in the Middle East, particularly those involving Iran. However, recent episodes suggested these effects tend to be short-lived. Iran produces around four million barrels per day (bpd) of oil, about 4.6 percent 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 in oil prices but have a relatively modest and short-lived impact on overall supply dynamics.

Furthermore, CIMB Securities identified a more serious, although still low-probability risk, stemming from the potential closure or disruption of the Strait of Hormuz, a critical maritime chokepoint for global energy flows. The strait handles roughly 20 percent of the world’s crude oil and 30 percent 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.