The Iran Conflict & The Ringgit: Why Malaysia's Petrol Prices are Creeping Up

With the conflict in Iran dominating the headlines, global oil markets have been in a state of shock. But for many Malaysians, the question is closer to home: If Malaysia is an oil-producing nation with PETRONAS, why are our prices increasing “little by little” instead of staying flat?

The answer lies in a mix of global geography, refinery economics, and a new government strategy for 2026.

Even though we have our own oil, we live in a globalized market. The war in Iran has led to the closure of the Strait of Hormuz.

Because 20% of the world’s oil is currently trapped behind that strait, the global supply has plummeted. When supply drops globally, the value of every barrel of oil—including the oil Malaysia produces—skyrockets. PETRONAS sells our high-quality “Tapis” crude to the world at these high prices, but we also have to buy refined products back at those same high global rates.

Here is a technical secret: Not all oil is the same.

• Malaysia’s Oil: We produce “Light Sweet Crude,” which is premium, expensive, and highly sought after for chemicals and high-end plastics.
• Our Needs: Our refineries are optimized to blend our local oil with “Medium Sour Crude” imported from the Middle East to produce the massive volumes of RON95 we need.

With the war in Iran disrupting Middle Eastern exports, the “blend” we rely on has become incredibly expensive to source, driving up the cost of production right here in Melaka and Pengerang.

You’ve likely noticed that prices aren’t jumping RM0.50 overnight, but rather creeping up in smaller increments. This is a deliberate Managed Float Strategy for 2026:

1. Subsidy Rationalization: The government is gradually reducing fuel subsidies to strengthen the national budget. Instead of a “big bang” price hike that causes inflation, they are letting the price “drift” upward to match market rates.
2. The Ringgit Factor: Since oil is traded in USD, the volatility caused by the war has weakened the Ringgit. A weaker RM means it costs more to “buy” the fuel from our own refineries.
3. Buffering the Shock: By increasing the price in small steps, the government prevents a sudden spike in transport and food costs, which would happen if they passed the full war-driven price on to us at once.

When oil prices go up, PETRONAS makes more profit (which helps the national treasury), but the cost of importing the specific refined petrol we put in our cars also goes up. We are essentially “rich in resources” but still “slaves to the global price.”

The war in Iran has made oil a rare commodity. Even though we have our own facilities, we aren’t an island. We are connected to the global price by our currency strength and our need for Middle Eastern blends.

Expect the “creeping” prices to continue as long as the Strait of Hormuz remains a high-risk zone.