Strait of Hormuz disruptions raise Malaysian food security concerns

KUALA LUMPUR: Ongoing tensions in the Middle East and disruptions at the Strait of Hormuz are exposing Malaysia’s reliance on imported crude oil and fertiliser, raising food security risks beyond short-term price cycles as higher input costs feed through to staples such as rice, poultry and vegetables.

Economists said while short-term measures such as targeted subsidies, fertiliser reallocation and buffer stock releases could help cushion immediate price pressures, longer-term strategies including supply diversification, productivity improvements and reduced reliance on imported inputs will be critical to strengthening Malaysia’s resilience against external shocks.

Monash University Malaysia School of Business lecturer Dr Javed Kamal cautioned that rising input costs are likely to feed through to higher prices for fresh fruits, vegetables and other agricultural products, as producers grapple with more expensive fertiliser and energy.

Against this backdrop, he said, Malaysia may need to take targeted steps to stabilise domestic supply, including temporarily reducing fertiliser exports and reallocating more output for local use.

“In this context, Malaysia could consider temporarily reducing fertiliser exports and reallocating supply for domestic use to support local industries. Optimising production and distribution will be crucial to managing short- to medium-term price fluctuations and meeting domestic demand,” Javed told SunBiz.

He added that diversifying import sources will also be key to mitigating external shocks, particularly as supply chains linked to the Middle East remain volatile.

“Malaysia should also seek alternative sources for key imports such as food, oil and fertilisers from the Middle East. Policymakers must carefully monitor the prices of daily essentials and fuel subsidies to avoid placing additional strain on government finances.”

Javed said while policy intervention is important, consumers may also need to adjust their behaviour in response to rising costs. “Consumers can be alerted to avoid unnecessary expenditures, run on a budget, and save more.”

Iran’s blockade of the Strait of Hormuz, a critical maritime route through which about one-fifth of global oil supplies and key materials such as food, natural gas and fertilisers pass, has disrupted global supply chains, although the US has since intervened to counter the blockade.

“Among fertilisers, urea, ammonia and phosphate are important for land to produce better crops, and the prices of these fertilisers are severely affected by the conflict in the Middle East,” Javed said, adding that while Malaysia produces urea domestically, rising raw material costs, particularly gas, have pushed up production expenses.

“Malaysia is expected to be affected by the Middle East crisis not only through oil price shocks but also through rising gas and fertiliser prices. The Malaysian agricultural sector will be affected in the short term due to higher input prices such as fertiliser,“ Javed said.

Palm oil production is particularly exposed, with fertiliser accounting for about 50% of production costs, meaning any increase in fertiliser prices directly impacts one of Malaysia’s key export sectors, he added.

According to Trading Economics, Malaysia imported fertiliser worth about US$1.33 billion (RM5.27 billion) in 2025, with Russia among its major suppliers. However, recent restrictions on ammonia exports by Russia to prioritise domestic use could further tighten supply.

“Despite this, Malaysia has the advantage of domestic urea production and is one of the largest producers in Southeast Asia. As such, Malaysia may also benefit from rising fertiliser prices through increased export revenues,“ Javed said.

Meanwhile, Associate Professor (Development Studies) at the National Graduate Institute for Policy Studies Guanie Lim said Malaysia’s policy response will need to strike a careful balance between cushioning cost pressures and preserving fiscal discipline.

“In view of the fact that the government still has considerable work to do in narrowing its fiscal deficits, it can really only consider time- and target-specific subsidies,” he told SunBiz.

He noted that broad-based support measures may not be sustainable.

Beyond short-term interventions, Lim said, the current shock should be seen as an opportunity to address deeper structural weaknesses in Malaysia’s food production system.

“A more productive and long-term move is to not waste this crisis. Some of the things it can do is to more aggressively push productivity-increasing measures, such as greater adoption of robots in industries like food production,” he said.

Longstanding inefficiencies, particularly in staple segments, continue to leave the country exposed to external disruptions, he added.

“Our rather low productivity in things like rice cultivation is well documented and is one of the reasons why we are once again scrambling to put out the fire caused by some external shocks.”

Former president of the Malaysian Estate Owners’ Association and past chief executive of the Malaysian Palm Oil Association Joseph Tek Choon Yee said geopolitical conflicts often manifest differently in agriculture.

“Wars are usually narrated through maps, missiles, mechanised eyes and men in dark suits trying to look composed. Agriculture encounters them differently,” he said.

“It encounters them in delayed vessels, firmer quotations, nervous procurement meetings, diesel bills that suddenly look indecent, and the slow realisation that what begins in West Asia may yet end up as a number in a plantation ledger and, eventually, on a supermarket receipt.”

Tek said the Strait of Hormuz should not only be viewed as a geopolitical chokepoint but also as a factor capable of reshaping the economics of Malaysian agriculture.

“There is a serious argument that Malaysia’s palm oil sector is relatively better placed than many other crops in the present turmoil,” he said, citing Glenauk Economics’ Julian McGill, who noted that oil palm relies more heavily on potash rather than nitrogen-based fertilisers and that large producers often have 60% to 70% of their fertiliser requirements secured in advance.

“Even if fertiliser use is cut, the effect on output may take many months, even up to two years, to show fully,” Tek said.

However, he cautioned that relative advantage does not equate to immunity. “To say palm oil is better placed is not to say palm oil is safe. Relative advantage is not immunity. It is merely a little more breathing room while everyone else is also holding theirs.”

Tek noted that Malaysia still relies heavily on imported fertiliser inputs, with about one-third of globally traded fertiliser passing through the Strait of Hormuz and the country importing around 63% of its fertiliser requirements.

“The problem is not merely whether the product exists somewhere in the system. It is whether the right product reaches the right grower at the right time and at a price that does not force agronomic self-harm,” he said.

He added that smaller growers are particularly vulnerable as they have less capacity to absorb price shocks or hold inventory, increasing the risk of reduced fertiliser application and lower future yields.

While higher palm oil prices driven by geopolitical tensions could provide some support, they would not fully offset rising input costs, Tek said.

“Palm oil finds itself in that familiar Malaysian predicament of being squeezed at the roots and lifted at the barrel. Helpful, yes. Decisive, no. Good prices can cushion margins, but they do not repeal agronomy,” he said.

IPPFA Sdn Bhd country economist Mohd Sedek Jantan said markets are showing signs of fatigue amid heightened geopolitical uncertainty. “Market exhaustion is setting in as geopolitical dynamics turn more complex and unpredictable. The market is no longer being driven by directional conviction, but is now shaped by an erosion of confidence.”

While the brief reopening of the Strait of Hormuz initially triggered a relief rally in US markets, regional markets including Malaysia were unable to price in the gains and are now more exposed to downside risks following renewed tensions.

Mohd Sedek said Brent crude has climbed towards US$95 (RM377) per barrel, reflecting a renewed geopolitical risk premium, while the US dollar has stabilised and regional currencies, including the ringgit, remain under pressure.

Despite these developments, he added, Bursa Malaysia remains range-bound, with the benchmark index struggling to break above key levels as investors adopt a more defensive stance.

“This is not a market searching for direction, but one actively avoiding commitment,“ Mohd Sedek said.

He added that while higher oil prices may support energy-related stocks, broader economic effects could be negative as rising costs fuel inflation and delay global monetary easing.

“Malaysian equities are therefore likely to remain range-bound with a defensive bias, characterised by narrow leadership, lower risk tolerance and persistent caution in foreign flows,” Mohd Sedek said.