Malaysia’s Economy Faces Mounting Pressure from Strait of Hormuz Supply Disruptions

Kuala Lumpur — Malaysia’s economy is coming under increasing strain from supply chain disruptions caused by the closure of the Strait of Hormuz, a vital maritime route that carries a significant portion of the country’s imports.

According to a report by the Southeast Asian Futures Initiative Centre (Seafic), as many as 106 types of Malaysian imports pass through the strait. These range from energy supplies and manufacturing inputs to everyday consumer goods. Experts warn that prolonged disruptions could trigger sharp price increases and force changes in consumer spending patterns.

The most vulnerable products include petroleum sulphonates, a critical ingredient used in engine lubricants and industrial additives. Malaysia sources 97.9% of these imports via the Strait of Hormuz, mainly from Kuwait, leaving the country highly exposed to shortages.

Liquefied propane and butane — key components of liquefied petroleum gas (LPG) — are also at high risk, with dependency rates of 83.9% and 54.8% respectively. Any sustained disruption would immediately push up operating costs for food outlets and small eateries, which are not covered by the gas subsidies available to households.

The petrochemical and packaging industries are already feeling the impact. Prices of high-density polyethylene (HDPE) and low-density polyethylene (LDPE) — widely used for milk bottles, plastic bags and food packaging — have risen sharply. The price of polyethylene terephthalate (PET) reportedly doubled within the first month of the disruption, driving production costs for plastic manufacturers up by 15% to 40%.

Some companies are already adapting. Dairy producer Farm Fresh, for example, has begun switching from plastic bottles to paper-based cartons in response to the rising costs.

In light of these challenges, the Seafic report recommends that Malaysian businesses and manufacturers accelerate efforts to diversify their sourcing strategies and reduce dependence on single trade routes.

The situation highlights the vulnerability of Malaysia’s open economy to geopolitical developments and the growing urgency for greater supply chain resilience.