Malaysia emerges as regional energy and stock haven as Iran war drags on

Malaysia has emerged as one of Southeast Asia’s top-performing markets as the war in Iran drives energy prices higher and pushes global investors towards economies better positioned to weather volatility, Business Times reports.

The shift highlights how Malaysia’s political stability, strong energy exports and rising investment in higher-value industries help strengthen the country’s appeal at a time when several regional peers face policy uncertainty and slower growth.

Malaysia’s benchmark stock index has outperformed most Asian markets this month as global markets were shaken by the Middle East conflict. The country has also avoided the heavy foreign outflows seen across emerging Asia, with overseas investors selling about $80mn of local shares on a net basis so far in March while the benchmark index has declined only slightly.

The ringgit has also maintained gains against the US dollar this year, outperforming regional currencies, supported by Malaysia’s current account surplus and its status as one of the few net energy exporters in Asia.

Analysts say rising oil prices are likely to boost government revenues at a time when other countries in the region are facing higher energy import costs. Petroleum-related income is projected to account for around 12.5% of government revenue in 2026, helped by offshore oil and gas production in Sabah, Sarawak and Terengganu.

Malaysia’s relative resilience also reflects broader structural changes in the economy. The government has stepped up spending in higher-value manufacturing sectors, particularly semiconductors and renewable energy, while the country has become a major destination for new data centre investments linked to artificial intelligence.

The strategy has already helped lift foreign direct investment to a record high last year and supported stronger economic growth than most Southeast Asian economies in 2025. Malaysia is maintaining its growth outlook for 2026 despite rising geopolitical tensions.

Banking, consumer and energy stocks have been among the strongest performers this year, while technology companies linked to the global semiconductor supply chain are attracting growing investor interest as Malaysia looks to move further into higher-value chip production.

Compared with its regional peers, Malaysia is benefiting from both defensive and growth factors. Indonesia is facing weaker investor sentiment following rating concerns, Thailand is constrained by high household debt and slow growth, and the Philippines is dealing with political and governance issues.

Analysts warn that a prolonged conflict in the Middle East could still trigger broader capital outflows from emerging markets, including Malaysia. However, the country’s current account surplus, improving fiscal position and expanding role in the global semiconductor industry are helping to strengthen its position as a relative haven in the region.

The country is also emerging as a key destination for artificial intelligence infrastructure in Southeast Asia, with large-scale data centre investments in Johor continuing to accelerate. These developments are expected to remain a key driver of Malaysia’s investment appeal in the near term.