Malaysia ended last week with seven oil tankers en route via the Strait of Hormuz and a government promise that supplies would last through May. Then US President Donald Trump announced a blockade.
Analysts say the escalation in the US-Israel war on Iran puts Malaysia on a collision course with an energy crisis sooner than expected.
“Putrajaya has already flagged June as a critical pressure point,” said geopolitical risk consultant Asrul Sani, associate vice-president of The Asia Group. “This development brings that timeline forward.”
The price of Brent crude surged to around US$103 a barrel when markets opened on Monday, hours after Trump declared the blockade following the collapse of peace talks with Iran at the weekend.
Trump announces US blockade of Strait of Hormuz, warns Iranians of being ‘blown to hell’
“If shipments are delayed or disrupted, Malaysia may need to buy energy on the open market at short notice, often at significantly higher prices,” Asrul said.
Iran’s near-total closure of the Strait of Hormuz in response to the war that began on February 28 choked off at least a fifth of the world’s oil and gas supply, triggering an energy crisis across much of Asia.
The threat of missile and drone attacks on shipping sent maritime war-risk insurance premiums soaring as much as 1,000 per cent, according to Reuters.
Malaysia was reportedly among a handful of nations granted free passage through the strait by Tehran as it began demanding tolls for safe transit.
Prime Minister Anwar Ibrahim confirmed on Friday that one of seven Malaysian-owned tankers had cleared the waterway, with the remaining six “on their way”.
A two-week ceasefire announced last week also promised to reopen the strait to shipping, but Trump’s blockade and the collapse of peace talks threaten to upend all previous arrangements entirely.
In a post on social media, Trump warned that any ship that had paid Iran’s toll would lose safe passage. “No one who pays an illegal toll will have safe passage on the high seas,” he wrote. “Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!”
US Central Command, which oversees American military operations in the Middle East and Central Asia, added in a separate statement that the blockade would not impede freedom of navigation, provided vessels were not “entering or departing Iranian ports and coastal areas”.
Tunku Mohar Tunku Mohd Mokhtar, an international relations specialist at the International Islamic University of Malaysia, said Kuala Lumpur’s immediate concern would be the six potentially stranded tankers.
“If the six stranded ships can’t pass through … and considering each carries between 600,000 and a million barrels, the loss [to Malaysia] would be substantial,” Tunku Mohar said, adding that Trump’s blockade would at a minimum delay their passage.
Malaysia has so far managed to mitigate the fallout from the conflict by leaning heavily on domestic natural gas production and costly subsidies, but the blockade threatens to overwhelm those defences.
Economy Minister Akmal Nasrullah Mohd Nasir warned on Sunday that the country would enter a “very critical period” in June, with industries already reporting shortages of oil-derived materials used in everything from plastics to medicines and medical devices.
The Middle East supplies roughly half of Malaysia’s oil, giving it an exposure to the conflict shared by a number of economies across the Asia-Pacific.
Malaysia’s government earlier said that the country had sufficient oil to last through May, and pledged to find alternative sources to replace the shortfall in shipments.
“The operative variable for APAC is not the diplomatic calendar but the resumption of physical oil flows, and until tankers move the energy price shock persists,” BMI Country Risk and Industry Analysis said in a research note on Monday.
Longer-term, Malaysia is expected to pursue supply deals with Russia or Latin American producers to reduce its Gulf dependency, according to Timothy Wong, a senior analyst with strategic advisory and consulting firm BowerGroupAsia.
“But again this will only secure supply, not address the sharp rise in costs tied to the ongoing conflict,” Wong said.
Source : SCMP
