KUALA LUMPUR, 7 June 2026 (The Capital Post) – Although the conflict involving Iran has formally paused following a ceasefire in April, Malaysian businesses continue to grapple with rising operational costs driven by disruptions in global energy supply chains.
Industry players warn that the economic impact of the conflict is still unfolding, particularly through higher electricity costs and increased pressure on manufacturing margins.
In Muar, Johor, widely recognised as Malaysia’s largest furniture manufacturing hub, more than 100 small factories have reportedly ceased operations in recent months. Industry observers attribute the closures to a combination of US tariff pressures, rising energy prices and escalating input costs that intensified following disruptions linked to the Iran conflict.
While the ceasefire between the United States and Iran on 8 April 2026 halted military hostilities, analysts note that it has not fully restored stability to global energy markets. The Strait of Hormuz, a key shipping route for approximately 20 per cent of the world’s oil and liquefied natural gas (LNG), continues to experience significant operational disruptions.
According to the International Energy Agency (IEA), global oil markets remain under pressure, with Gulf oil production still below pre-conflict levels and global inventories declining at a rapid pace.
The impact is increasingly being felt in Malaysia through electricity pricing mechanisms. A survey conducted by the Federation of Malaysian Manufacturers (FMM) in May 2026 found that 72 per cent of respondents reported worsening business conditions since the conflict began, while 28 per cent had implemented or were considering workforce adjustments.
Industry experts point to changes introduced in July 2025, when Malaysia replaced the Imbalance Cost Pass-Through (ICPT) mechanism with the Automatic Fuel Adjustment (AFA) system. Unlike ICPT, which reviewed fuel costs every six months, AFA adjusts electricity pricing monthly based on global fuel prices and foreign exchange movements.
The mechanism initially benefited businesses through rebates during late 2025 and early 2026. However, the rebate declined significantly before turning into a surcharge in May 2026 for the first time since the system was introduced.
The May surcharge was set at 1.38 sen per kilowatt-hour (kWh), with forecasts indicating further increases during the third quarter of the year.
EFS Group Chief Executive Officer Darren Tan said businesses are now facing greater exposure to global energy market fluctuations.
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“What previously functioned as a buffer keeping electricity bills lower has turned into a surcharge. That exposure is becoming increasingly difficult to absorb passively,” he said.
According to Tan, the current situation differs from previous energy price cycles because it is driven by structural disruptions rather than temporary demand fluctuations.
“This is not a short-term geopolitical event. What we are seeing is driven by persistent geopolitical instability, the complexity of the global energy transition and growing demand from digital infrastructure,” he said.
As a result, more companies across the Asia-Pacific region are accelerating investments in renewable energy solutions, particularly solar power, to reduce dependence on volatile fuel markets.
Tan noted that discussions around renewable energy have shifted from sustainability objectives to business resilience and cost certainty.
“The broader shift must be from efficiency to resilience. Solar provides more than cost savings; it offers visibility and greater control over future energy expenditure,” he said.
Businesses are also being encouraged to take advantage of existing government incentives, including the Green Investment Tax Allowance (GITA), which is scheduled to expire on 31 December 2026.
Programmes such as the Solar Accelerated Transition Action Programme (Solar ATAP) and the Corporate Renewable Energy Supply Scheme (CRESS) are also providing companies with additional pathways to adopt renewable energy solutions.
Industry observers believe companies that move early to secure long-term energy strategies will be better positioned to manage future volatility and maintain competitiveness in an increasingly uncertain global environment.– The Capital Post
