When the Hormuz strangles our job

What turned a distant war into a global energy emergency? Following failed nuclear negotiations in Geneva and a prior military conflict in June 2025, the United States and Israel launched air strikes on Iran on Feb 28. Iran's swift retaliation was to close the Strait of Hormuz to international shipping.

Before the war, roughly 3,000 vessels transited the Hormuz monthly, carrying an estimated 15 million barrels per day of crude oil, amounting to about one-fifth of the world's oil trade. By April, traffic had plummeted to just 191 vessels, a mere five per cent of the pre-war average. Brent crude oil, the global benchmark, surged above USD100 per barrel, from around a pre-war price of USD65.

How does a chokepoint thousands of miles away affect Southeast Asian economies? The consequences for Southeast Asia have been severe. The Philippines, which imports more than 90 per cent of its oil from the Middle East, saw domestic fuel prices soar past ₱100 per litre (about RM6.40), prompting the declaration of a national energy emergency by end of March 2026.

The unemployment rate climbed to 5.1 per cent, up from 3.8 per cent a year earlier, with 357,000 Filipinos losing their jobs between February and March. Thailand, which has the heftiest net oil import bill in Asia at 4.7 per cent of GDP, tapped its national Oil Fuel Fund to prevent diesel prices from surging.

However, the administrative price caps are unable to keep factories open or payslips intact. Factory closures rose 58 per cent in early 2026, threatening Thailand’s manufacturing sector that employs 6.2 million workers.

Closer to home, should Malaysian workers be worried?

Nearly 70 per cent of Malaysia's crude oil imports originate from the Persian Gulf and roughly half of total oil supply transits the Strait of Hormuz. Malaysia’s monthly fuel subsidy bill has jumped from RM700 million to RM3.2 billion, representing an additional RM83 million per day draining public finances.

If sustained through the year, fuel subsidies alone could cost RM48 billion annually, nearly equivalent to Malaysia's entire Budget 2026 allocation for subsidies and social assistance. The Social Security Organisation (Perkeso) data shows that retrenchments in Q1 2026 totalled 24,100 workers, a 47 per cent surge over the same period last year. Over 4,700 workers lost their jobs in just the first 16 days of April.

Geographically, Klang Valley bore more than half of all layoffs in Q1 2026. Jobs in Penang's electrical and electronics sector and Johor's export-oriented industries are on the onslaught path. The informal sector, gig workers and small businesses are the most vulnerable.

What must the Malaysian government do at this critical juncture?

The labour market requires faster interventions. First, Perkeso's wage subsidy mechanism, which was proven useful during Covid-19, should be placed on standby to prevent widespread retrenchments from cascading through manufacturing supply chains.

Second, targeted cash transfers to gig workers and day-waged workers must be deployed pre-emptively, not after layoffs.

Third, Malaysia must reduce its risky dependence on Gulf oil. In the short term, we must secure crude supplies from non-Gulf sources. In the longer term, we must build a strategic petroleum reserve, an emergency stockpile to better prepare for this kind of crisis.

Professor Dr Soon Jan Jan is a professor of economics at Universiti Utara Malaysia (UUM) and an Associate Research Fellow at its Economic and Financial Policy Institute (ECOFI), specialising in labour, migration and higher education policy. The views expressed in this article are the author's own and do not necessarily reflect those of Sinar Daily.