Iran–US tensions could push oil to US$80, testing Malaysia’s data centre boom and growth agenda

KUALA LUMPUR 2 Mac - The escalating military and diplomatic confrontation between the United States and Iran is sending fresh tremors through global energy markets — and Malaysia’s policymakers would be wise to treat it not as a distant geopolitical episode, but as a potential structural shock to the country’s growth trajectory.

According to Dr Shahreen Madros, Adjunct Professor at UKM Graduate School of Business, the economic implications extend far beyond what appears to be a regional conflict.

“There’s much more than what appears to be a Middle East war between the three countries involved for now,” said Dr Shahreen Madros in an interview with DagangNews.com.

Oil Price Shock: From US$60 to US$80?

At the heart of the concern lies energy security.

The Strait of Hormuz — a critical artery for global oil shipments — sits at the centre of the current standoff. Any sustained disruption would directly affect major consuming economies across Asia and beyond.

“There’s a good chance that the current price of oil, around US$60 per barrel, will soon shoot up to around US$80 per barrel,” said Dr Shahreen.

A jump of that magnitude would not merely reflect speculative pressure. It would embed geopolitical risk into global pricing, transmitting higher costs through shipping, manufacturing and supply chains — sectors vital to Malaysia’s export-oriented economy.

“Energy has always been a key driver of the global economy. China, Korea and Japan all depend on oil coming through the Strait of Hormuz,” he added.

Malaysia: Producer on Paper, Importer in Practice

While Malaysia remains a petroleum-producing nation, Dr Shahreen cautioned against assuming that higher oil prices automatically benefit the broader economy.

“While Malaysia may be a producer of petroleum, our contribution to global supply is relatively small, probably less than 1%.

"Furthermore, we are now near, if not already, a net importer of petroleum. Thus, while a higher oil price will be good for an entity like PETRONAS, it may not necessarily be good for the country,” he said.

The fiscal implications are significant.

“The government most certainly will not be able to support fuel subsidies and will probably expedite pricing at market value. Naturally, this would mean higher prices for industry, logistics services, and therefore for the public. This scenario will most likely happen — it is just a question of how soon.”

Such a shift would raise operating costs across transport, food production, manufacturing and household consumption, amplifying inflationary pressures.

Data Centres: Growth Engine Facing Energy Risks

Perhaps most critical is the potential vulnerability of Malaysia’s rapidly expanding data centre ecosystem — a cornerstone of its digital economy ambitions.

“Our growth now depends quite a bit on data centres. This industry depends on easy access to affordable electricity and water. The increase in fuel prices will have a domino effect on many fronts. The cost of logistics, electronic parts and fuel will surely affect this industry significantly,” Dr Shahreen warned.

As Malaysia positions itself as a regional digital infrastructure hub, rising energy costs could alter investment economics, particularly for hyperscale operations that rely on stable, competitively priced utilities.

“Global trade will slow down. I cannot see how it will not negatively impact our economy,” he added.

China in the Strategic Equation

Dr Shahreen also pointed to a broader geopolitical calculus.

“Personally, I think Japan and Korea are collateral players, but China is the main target in terms of the final impact.”

China’s dependence on Venezuelan and Iranian crude places it at a sensitive intersection of energy and geopolitics.

“After Venezuela, Iran would be the final piece in holding back China’s economic growth — or curtailing it, whichever way you look at it,” he said.

For Malaysia and ASEAN economies closely integrated with China’s supply chains and demand cycles, any sustained slowdown in Beijing would ripple through exports, trade financing and capital flows.

“Other ASEAN countries that are not oil producers, or that import much of their fuel, will be even worse off,” he cautioned.

From Energy to Employment: The Domino Effect

Dr Shahreen outlined a direct transmission chain from energy prices to employment and consumer demand.

“With industry slowdown, in the longer term, it will affect job opportunities. This will eventually result in less money flowing into the economy and thus weaker demand. Naturally, all these would spell difficult times for the masses.”

Unlike past conflicts, he believes the present situation carries deeper structural risks.

“Unlike Iraq, I think this war will be much tougher. The longer it is prolonged, the worse its impact on the global economy will be.”

Strengthening Domestic Resilience

On policy, Dr Shahreen urged early action rather than reactive measures.

“The government would be wise to examine our internal capacity for basic goods. Any form of importation will only see prices increase. Hopefully, our leaders in the respective ministries are already taking steps now rather than waiting for eventualities.”

The conflict may be unfolding thousands of kilometres away, but its economic shockwaves could be measured in ringgit, investment flows and household purchasing power.

For Malaysia, the real question is not whether oil touches US$80 — but whether the economy is structurally prepared when it does. - DagangNews.com