Iran Is Fighting With America And Israel, How Does This Affect Malaysia?
Rising crude oil prices will benefit Malaysia’s government fiscally but also force it to accelerate subsidies of RON95, making the conflict a “double-edged sword” for the country.
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Tensions in the Middle East increased as the US and Israel launched an attack on Saturday (28 February), with Israel describing the action as “a pre-emptive attack” to “remove threats”.
The attack came after the US massively increased its military presence in the region to pressure Tehran regarding its nuclear programme and its crackdown on mass protests, BBC reported on 21 February.
According to The Edge, Malaysia’s Economy Minister Akmal Nasrullah Mohd Nasir said the government will be examining how the conflict will impact Malaysia’s economy.
He was quoted as saying that from an economic standpoint, there are several key issues to examine, including Malaysia’s relationship with Iran and geopolitical tensions affecting the global economy.
“Of course, one important angle to be assessed is the production of oil and gas, as Iran is a major regional and global producer.
“In addition, we need to see the effects of the global economic supply chain,” the minister said.
The Fiscal Impact on Malaysia is a “Double-Edged Sword”
As a net exporter of oil and gas, Malaysia typically sees a boost in government revenue when global oil prices rise. Analysts report that Brent crude may jump toward US$90 – US$100 per barrel due to fears of the Strait of Hormuz being closed.
While the government gains from oil exports, Malaysians may suffer. Higher global energy prices drive up the cost of shipping and manufacturing. This could lead to a spike in the price of imported goods and food, potentially forcing the government to increase subsidies or face public discontent over the rising cost of living.
Economist and chairman of Malaysia Airports Holdings Berhad Dr Nungsari Ahmad Radhi cautioned that higher oil prices do not automatically translate into fiscal gains for the Malaysian government.
In a Bernama report, he said: “A rise in oil prices profits Petronas. But, the cost of petrol subsidies also rises for the government. What is the net effect? That depends on the elasticities.”
Meanwhile, Prime Minister Datuk Seri Anwar Ibrahim recently said the government will try to maintain the price of RON95 petrol for Malaysians despite global market uncertainty.
Insya-Allah, for the people of Malaysia, I will try to ensure there is no increase in fuel prices,” said Anwar, who is also Finance Minister.
To put it simply, Iran’s conflict with the United States and Israel may give rise in oil prices which is good for Malaysia since we are an oil-producing country, but it will also force the government to bear higher fiscal responsibility if it wants to maintain RON95 petrol subsidies for Malaysians.
A Principled Condemnation: The Diplomatic Impact on Malaysia
As a prominent Muslim-majority nation, Malaysia faces internal pressure to support Iran against Western/Israeli military action.
However, the government is also walking a tightrope, calling for an “immediate ceasefire” and urging all parties — including Iran — to show restraint to prevent a total world war.
Anwar strongly condemned the killing of Iran’s Supreme Leader, Ayatollah Ali Hosseini Khamenei, by US and Israeli forces.
Through a statement on X (formerly Twitter), he also warned that the act could push the Middle East into a period of grave and prolonged instability.
📝🇲🇾 pic.twitter.com/xjEWgwmHyc
— Anwar Ibrahim (@anwaribrahim) February 28, 2026
The Star reported opposition parties condemning the joint military strikes on Iran as well.
Bersatu president Tan Sri Muhyiddin Yasin described the bombardments as a dangerous act that threatened peace and future diplomatic efforts in the Middle East.
Opposition leader Datuk Seri Hamzah Zainudin too called for major powers and countries in the Gulf region to take the path of peace and negotiation for the sake of security and stability.
The Iran-US-Israel conflict, recapped
The current war, often referred to in news cycles as “Operation Epic Fury”, marks the end of the “shadow war” and the start of direct kinetic combat.
It was the United States government, specifically its Department of War, which named its sweeping strikes on Iran as “Operation Epic Fury”.
OPERATION EPIC FURY 🇺🇸
— Department of War 🇺🇸 (@DeptofWar) February 28, 2026
The immediate trigger was the collapse of nuclear negotiations in early 2026. The US and Israel claimed Iran had reached “breakout capacity” (the ability to produce a nuclear weapon).
The goal of the US and Israel is to dismantle Iran’s nuclear infrastructure and, as stated by the Trump administration, achieve “regime change” to end Iran’s support for regional proxies like Hezbollah and the Houthis.
On the other end, Iran’s goal is survival and deterrence. Iran views the strikes as an illegal act of aggression and has responded by targeting US bases in Bahrain and the United Arab Emirates, as well as launching missile barrages into Israel.
On 28 February 2026, a massive coordinated air campaign by the U.S. and Israel targeted Tehran and nuclear sites in Isfahan.
During these strikes, Ayatollah was killed. This decapitation of the Iranian leadership has shifted the war from a tactical dispute over nuclear sites to a total existential conflict.
Currently, Iran’s attacks on Dubai have gone viral as videos of missile strikes destroying a luxury hotel as well as parts of Dubai International Airport last weekend circulated on social media.
It is understood that Iran was targeting US assets in Dubai.
@bbcnews Dubai International Airport – the world's busiest by passenger traffic – was damaged in an "incident" that injured four staff, according to authorities. Iran has launched attacks across the Middle East in response to a massive and ongoing attack against it by the US and Israel. #Dubai #DubaiAirport #Israel #Iran #US #BBCNews ♬ original sound – BBC News
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