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KUALA LUMPUR (March 31): Bank Negara Malaysia (BNM) warned that if the US-Israel-Iran conflict lasts over six months and pushes oil prices above US$110 per barrel, Malaysia’s 4%-5% growth outlook may be revised.
BNM governor Datuk Seri Abdul Rasheed Ghaffour said the central bank’s stress tests incorporate multiple scenarios based on the duration and severity of the conflict, as well as its impact on global growth and energy markets.
"Of course, we look into the extent of disruption and how long this conflict will last... Our baseline scenario is one to two months, but our likely scenario will be three to six months, and a tail risk scenario of more than six months," he said during BNM's annual dialogue press conference on Tuesday.
The central bank’s oil price assumptions range from US$70–US$90 per barrel under its baseline scenario, US$90–US$110 in its likely scenario, and above US$110 in a tail risk case.
Abdul Rasheed said BNM’s growth projection for the Malaysian economy of 4% to 5% for 2026 already incorporates the baseline and part of the likely scenario, suggesting the economy remains resilient under moderate stress conditions.
“Given the likely scenario and the baseline, our economy is able to cushion the impact,” he said.
“If things were to get worse, under the tail risk scenario… there's an avenue for us to always do a revision to our growth forecast,” Abdul Rasheed added.
He explained that BNM factors in the extent of infrastructure damage from the conflict in its assessments, noting that uncertainties remain high amid incomplete and evolving information.
“This is something that is still not very clear because… with the fog of war, things are uncertain, ambiguous, (and) not clear,” he added.
Abdul Rasheed added that year-to-date, oil prices have averaged about US$77 per barrel, which is still within the central bank’s baseline range.
Geopolitical tensions escalated in late February 2026 when conflict broke out involving the US, Israel, and Iran, disrupting oil and gas production and global supply chains.
Shipping through the Strait of Hormuz, which handles nearly 20% of the world’s oil, was affected due to safety concerns, higher insurance costs, and the withdrawal of major shipping operators.
Temporary closures of production facilities and storage limits further reduced supply, driving Brent crude from around US$71 per barrel before the conflict to over US$100 in early March, and it has since traded between US$85 and US$105 per barrel.