Malaysia expected to gain revenue from higher crude prices

As a net exporter of oil and gas, Malaysia is expected to gain revenue from the higher crude oil prices prices, but the vulnerability to logistics and inflation from UAE’s exit – fueled by the chaos of the US-Iran war – remains a concern.

Malaysia’s national budget for 2026 was built on the assumption of Brent crude oil price to be within the range of USD60-70pb.

However, with prices now sustaining above USD100pb, the fiscal impact of oil has shifted. For every USD10pb increase in Brent crude price, the following are expected:

(i) roughly RM3b is added into Malaysia’s federal revenue
(ii) roughly RM3.5b is added to the government’s fuel subsidy bill

The UAE’s exit will eventually make prices more volatile. Should it lead to a price war i.e. the crashing of oil prices to USD40pb or below, Malaysia’s budget deficit might get widened.

Nonetheless, Malaysia’s primary concern in the near to middle term is the ongoing blockade in the Straits of Hormuz to import and export crucial products for various sectors.

higher crude prices

Recent record showed that Malaysia’s inflation ticked up to 1.7%, due to the rising global cost of shipping, insurance, and raw material for oil and gas operations and productions. Major industries like glove and technology rely on specialized chemicals and gases that often transit through the Gulf.

The blockade has created a 2–4-week lag in industrial inputs, causing GDP growth to slow down to 5.3% in 1QCY26 (about -16%qoq).

The silver lining to the UAE-OPEC+ situation is the high possibility of UAE trading in Petroyuan.

“This is anticipated to align with Malaysia’s own long-term interests in diversification. We opine that there would be a possibility to see more UAE sovereign wealth redirected to neutral hubs like Malaysia, particularly in the data centres and AI infrastructure industries,” says MBSB in its recent report on oil and gas.

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