Strait of Malacca Disruption Could Push Malaysia’s Inflation Above 3%

KUALA LUMPUR, AUGUST 2026 – A severe disruption to shipping through the Strait of Malacca could push Malaysia’s headline inflation above 3% and reduce economic growth to as low as 2.5% in 2027, Apex Securities Research has warned.

The research firm said Malaysia remains highly exposed to any prolonged interruption in the strategic waterway because maritime transport represented around 48% of the country’s total trade in 2025. Based on the location and cargo volume of major Malaysian ports, as much as 36.8% of total trade could be directly affected by a serious disruption.

That amount would represent approximately 77% of Malaysia’s maritime trade, highlighting the Strait’s importance to the country’s export-oriented economy.

Apex Research described the possibility of a major closure as a low-probability but high-impact risk rather than its central economic forecast. However, it said investors and policymakers should not dismiss the potential consequences.

The Strait of Malacca is also one of the world’s most important energy routes. During the first half of 2025, approximately 23.2 million barrels of crude oil and petroleum products passed through the waterway each day.

That volume was equivalent to 29.1% of global seaborne oil trade and 22.2% of worldwide oil supply, according to the research firm. A major disruption could therefore drive Brent crude prices towards US$120 per barrel.

Higher international oil prices would place additional pressure on Malaysia’s inflation outlook, particularly through adjustments to domestic petrol and diesel prices.

Fuel accounts for around 5.7% of Malaysia’s consumer price index basket. Apex Research currently assumes average Brent prices of US$85 per barrel in 2026 and US$80 in 2027.

The firm forecasts Malaysian inflation at 2% for both years under its base-case scenario. However, if Brent crude averages US$95 per barrel or more, headline inflation could rise beyond 3%, requiring closer attention from policymakers.

Its projection assumes the government continues providing partial fuel subsidies based on an oil price of US$80 per barrel, while additional increases are reflected in domestic fuel prices.

Unlike geopolitical tensions elsewhere that mainly affect Malaysia through higher energy prices, a disruption in the Strait of Malacca would directly affect the country’s trade flows, supply chains and overall economic activity.

Apex Research described the waterway as the backbone of Malaysia’s external trade because major ports such as Port Klang, the Port of Tanjung Pelepas, Penang Port and Johor Port are located along or closely connected to the route.

Alternative maritime routes are available through the Indonesian archipelago, but they are generally longer and less efficient.

Rerouting ships would increase freight charges, extend delivery times and add complexity to logistics operations. These pressures could be particularly damaging to industries that depend on timely shipments, including electrical and electronics manufacturing, commodities and other export-driven sectors.

Even a temporary interruption could delay raw materials, disrupt production schedules and weaken the international competitiveness of Malaysian exporters.

Apex Research currently expects Malaysia’s gross domestic product to expand by 4.5% in 2027. However, it outlined several possible outcomes depending on the severity of the disruption.

Under a mild scenario involving up to 50% of shipping activity, GDP growth could slow to around 3.5%.

Under a moderate scenario, where between 51% and 75% of shipping is disrupted and priority is given to essential goods, energy supplies and strategic cargo, growth could decline to between 3.1% and 3.5%.