The immediate effect pertaining to the tensions in the Middle East still remains pretty manageable when it comes to Malaysian businesses with dealings in the region, though there are some companies that are keeping a close eye on possible supply chain issues and rising transport costs, opine the industry groups.
Dr. Chin Chee Seong, SME Association of Malaysia president, remarked that while most of the companies are not heavily dependent on the Middle East market, secondary sectors that depend upon the global distribution channels may as well feel the effect.
These happen to include manufacturing of export-oriented products, food processing, and downstream palm oil products along with electrical and electronics – E&E.
According to Chin, “Service industries such as tourism and construction may also be affected due to higher transport costs and disrupted air and shipping routes.”
Chin further said that the feedback from the small and medium enterprises – SME goes on to suggest the direct effect remains limited, though the supply chain issues and growing logistics costs, specifically as the shipping companies reroute the vessels in order to avoid the conflict zones, still remain a steep challenge.
Notably, the tensions in the Middle East have flared up since February 28, 2026, after Israel and the U.S. struck Iran, leading to retaliatory action by Teheran against US interests in the Gulf and thereby leading to the closure of major shipping routes such as the very busy Strait of Hormuz.
Apparently, Datuk William Ng, the Small and Medium Enterprises Association of Malaysia – Samenta president said that SMEs have been alerted with regard to potential shipping delays of around two months for shipments to and from Europe as well as the Middle East, with freight expenses most likely rising 40 to 50% if this conflict stretches.
Chin added that “this is troublesome for our SMEs, given their tight margins and limited ability to diversify supply chains. Uncertainties by the US tariff also make pricing and supply decisions difficult, and many small exporters may refrain from taking additional orders, which will hurt the sector.”
Ng also went on to explain that many of its members have started to buffer their inventory in order to safeguard themselves against shipping delays while at the same time tightening the credit terms so as to protect the cash flow, which is a part of the contingency plans.
He also remarked that SMEs should quickly diversify their supply chains and also decrease dependence on one market by shifting toward the intra-Asean trade across high-potential regions such as South Asia as well as Africa.
As per Chin, through making the most out of the recent ASEAN chairmanship of Malaysia along with new digital economy frameworks, there does exist a short window of opportunity for an ASEAN pivot.
Datuk Ng Yih Pyng, Associated Chinese Chambers of Commerce and Industry of Malaysia – ACCCIM president, remarked that the tensions have indeed prompted businesses to further delay capital investments.
As per Pyng, “The event has triggered an economic downshift. Businesses are cautious on capital spending until the situation becomes clearer.”
He opines that businesses will be required to customize their plans as per the kind of operation, especially those which happen to depend quite heavily on energy or are engaged in tourism.
He also emphasized the requirement for government support, particularly when it comes to cash flow, businesses that are export-oriented, and also local fuel subsidies.
