Bank Muamalat’s Dr Afzanizam Abdul Rashid warns of prolonged supply shock, surging subsidy costs and historic trade disruption as the US–Israel war with Iran escalates into a global energy crisis
BY TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
March 23, 2026
KUALA LUMPUR – When Dr Mohd Afzanizam Abdul Rashid, Chief Economist at Bank Muamalat Malaysia Bhd first spoke to TNS News in the immediate aftermath of Operation Epic Fury, Brent crude was trading at around USD70 to USD73 per barrel.
That was then.
Now entering its fourth week, the US–Israel war against Iran has pushed global energy markets into a full-scale supply shock – one that is no longer theoretical, but structural.
Brent crude has surged well above USD100 per barrel and traded near USD120, while physical oil markets in Asia are tightening even more sharply. The Strait of Hormuz – through which roughly 20% of global oil supply flows remains effectively shut, with tanker traffic collapsing and insurance markets freezing.
In the latest escalation, the United States has issued a 48-hour ultimatum to Iran to reopen the Strait, warning that failure to comply could trigger direct strikes on energy infrastructure , a move that would further destabilise global supply.
What was initially seen as a severe but temporary disruption is now being reassessed as something far more enduring.
What Dr Afzanizam said then carries even greater weight now.
From Conflict to Systemic Shock
The scale of disruption has intensified rapidly.
Since the launch of Operation Epic Fury on February 28, the conflict has expanded beyond military confrontation into direct attacks on energy infrastructure across the region.
Israel’s strike on Iran’s South Pars gas field — which accounts for a significant share of Iran’s production — disrupted output and triggered immediate price spikes. Iran has retaliated by targeting energy-linked assets across the Gulf, while tanker movements through the Strait of Hormuz have effectively collapsed.
Even emergency measures are struggling to stabilise markets. Strategic reserve releases have provided only temporary relief, with prices resuming their upward trajectory almost immediately.
What makes this crisis different from past oil shocks is its scale and location.
For the first time in modern history, the Strait of Hormuz — the world’s most critical energy chokepoint — has effectively ceased functioning.
Dr Mohd Afzanizam Abdul Rashid
A Warning That Now Looks Prescient
It is against this backdrop that the assessment of Dr Mohd Afzanizam Abdul Rashid must now be read.
One of Malaysia’s most closely followed macroeconomic voices, Dr Afzanizam warned from the outset that the shock could not be easily dismissed.
“This is a main downside risk emanating from global shocks,” he said. “We are highly uncertain as to how long the military attack will last. The main concern now is how high crude oil prices would go and how protracted the campaign is. On that note, it is hard to characterise the current shock as a temporary blip.”
That assessment now aligns closely with how markets are behaving.
What began as volatility is now persistent pricing of disruption.
How High Can Oil Go? The Upper Bound Is Rising
Even in the early days of the conflict, Dr Afzanizam pointed to historical precedents.
“We have seen Brent crude go as high as USD146 per barrel in 2008, and USD127.98 in 2022… it can happen.”
Today, those levels are no longer theoretical reference points — they are increasingly being treated as realistic scenarios if the Strait remains closed.
Trade and Logistics: The First Transmission Channel
The sector Dr Afzanizam identified as most vulnerable has proven to be exactly that.
“Aviation and shipping could be the immediate sectors that will feel the brunt.”
Malaysia’s exposure is significant. Sea trade accounts for 45.2% of exports and 50.6% of imports, while air trade accounts for 40.5% of exports and 37.5% of imports.
“Any disruptions and rising logistics costs would affect our trade,” he said.
Freight markets have already reacted sharply, with shipping costs surging and supply chains tightening across key routes.
From Temporary Shock to Structural Risk
When asked whether this could become a structural turning point, Dr Afzanizam was direct.
“It is quite probable.”
Asia remains particularly exposed.
“China, India, Japan, South Korea, Singapore and Taiwan rely heavily on crude imports… disruptions will raise import costs and transmit into domestic inflation.”
Unlike previous crises, this conflict directly targets the energy corridor that feeds Asia’s economies, amplifying its systemic impact.
Malaysia’s Fiscal Pressure Point
For Malaysia, the most immediate stress point lies in fuel subsidies.
“Malaysia imports oil for domestic consumption… this will result in higher subsidy costs.”
The numbers are clear. Petrol subsidies reached RM23.1 billion in 2022 when Brent averaged around USD99 per barrel, compared to RM19.7 billion in 2024 when Brent averaged USD79.9.
With oil now above USD100, subsidy costs are expected to rise again unless policy adjustments are introduced.
“If the ringgit remains resilient, it could contain import costs,” he added.
A Structural Transition — But Too Slow for Now
Despite the immediate crisis, Dr Afzanizam pointed to a longer-term shift.
“There is a structural change in fuel consumption… electric vehicles and sustainability will reduce dependence on fossil fuels.”
Malaysia’s EV sales surged 105.7% last year, signalling early momentum in that transition.
But the shift will take time to materially reduce exposure to oil price shocks.
A Crisis Still Escalating
The situation remains fluid and increasingly volatile.
The Strait of Hormuz is still largely closed. Energy infrastructure has become an active battlefield. Major powers are escalating rather than stepping back.
The risk is no longer just high oil prices — it is sustained disruption to the global energy system.
The Bottom Line
Dr Afzanizam’s early assessment now reads as foresight.
This is no longer a temporary shock. It is a prolonged supply disruption with systemic consequences.
The pressure points are multiplying — energy prices, trade flows and fiscal stability.
As Malaysia navigates this crisis, policy responses must be targeted, disciplined and precise — because the economic test ahead is likely to be longer, deeper and more complex than initially expected.
Notes to Editor
Dr Mohd Afzanizam Abdul Rashid is Chief Economist at Bank Muamalat Malaysia Berhad, Adjunct Professor at Universiti Teknologi MARA, and advisor to Parliament’s Special Select Committee on Finance and Economy. He holds a PhD in Economics from Universiti Kebangsaan Malaysia.
Sources
TNS News exclusive interview with Dr Mohd Afzanizam Abdul Rashid; Reuters; Al Jazeera; CNBC; Axios; CNN Business; NBC News; Fortune; International Energy Agency; Federal Reserve Bank of Dallas; Rapidan Energy Group; Deutsche Bank.