US-Israeli strike on Iran could push up Malaysia’s oil revenue – but also its subsidy bill

The Iran conflict jolts global oil markets, creating a complex challenge for Malaysia's fuel subsidy scheme and national economy. Read more at straitstimes.com.

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KUALA LUMPUR – Global oil prices jolted higher after the US-Israeli strike on Iranian targets triggered retaliatory attacks from Tehran, raising fears of a broader Middle East conflict that could choke a critical shipping lane.

Brent crude – the global benchmark for oil prices – briefly spiked to about US$78 (S$99.60) per barrel on March 2 before easing slightly as traders weighed the risk of wider disruption.

For Malaysia, the concern is less about supply and more about the bill. Higher crude prices boost petroleum revenues, but they also drive up the cost of fuel subsidies that the administration has struggled to rein in – threatening to undo months of difficult work to bring government spending under control.

Economists warned that if elevated prices persist, the government will face renewed pressure to either absorb the extra cost or pass it on to consumers at a politically sensitive moment.

“Regional conflicts come in different degrees, depending on the scale and duration of the Middle East conflicts,” Socio-Economic Research Centre executive director Lee Heng Guie told The Straits Times.