KUALA LUMPUR (March 6): The escalating Middle East crisis is sending energy prices surging, but Malaysia's inflation is expected to remain steady with an estimated increase of just 0.1%, according to CIMB Securities. 

In a strategy note on Friday, the research house said headline consumer prices could edge marginally higher should global energy costs climb, based on the assumption that the RON95 fuel subsidy price remains capped at RM1.99 per litre under the Budi95 scheme.

The annual inflation rate for 2025 was 1.4%, a slower rate compared with 1.8% in 2024. In January this year, inflation was up to 1.6%.

Bank Negara Malaysia, in its latest briefing, said headline inflation in 2026 is expected to remain moderate. 

The research house also noted that while previous geopolitical conflicts have historically triggered commodity price spikes, the current tensions in the Middle East are expected to have limited advantage to edible oils such as crude palm oil (CPO) due to the region being one of the largest consumers.

“Unlike during the Russia-Ukraine conflict, CPO prices may see limited upside as the Middle East is primarily a key consumer rather than a major producer of edible oils,” said CIMB Securities.

At the time of writing, the benchmark of palm oil futures for May delivery stood at RM4,235 per tonne on the Bursa Malaysia Derivatives Index. 

With potential disruptions to shipments through the Strait of Hormuz — which is a critical route for global oil and liquefied natural gas trade — due to the risk of vessel attacks, global supply in energy markets could tighten and force “war premiums” to prices.

Reflecting these risks, CIMB Securities raised its 2026 crude oil price forecast to between US$70 (RM276.39) and US$85 per barrel, citing tighter supply conditions and heightened geopolitical uncertainty.

The research house did note that higher oil prices could also provide modest support to Malaysia’s economy, given its status as an oil and gas producer. Analysts estimate that a US$10 per barrel increase in Brent crude prices could lift Malaysia’s real gross domestic product (GDP) by about 0.06%-0.1%, supported by higher oil-related output and government spending.

However, the upside could be partially offset by higher fuel subsidy costs. While petroleum-related government revenue could rise by about RM3.5 billion, the increase in fuel subsidies may result in a net fiscal deterioration of around RM1.6 billion, equivalent to about 0.08% of GDP, says CIMB Securities.