Rising oil prices threaten to squeeze Malaysia’s construction sector as costs climb
KUALA LUMPUR: Escalating geopolitical tensions in the Middle East and the rise in crude oil prices are expected to intensify cost pressures on Malaysia’s construction and property sectors over the next six to 12 months, with steel, cement, logistics and fuel costs all moving higher.
Industry players warn that sustained energy price volatility could affect project viability, particularly for contractors operating under fixed-price contracts, where rising input costs are difficult to pass on.
Zerin Properties chief executive officer Previndran Singhe said construction costs are already rising as energy remains deeply embedded throughout the building supply chain.
“Steel, cement and logistics costs are all moving in the same direction — upwards. Energy is embedded in every stage of construction, so when crude rises, the whole cost stack shifts.
“We’re looking at 18 to 25 per cent above pre-shock baselines for projects on fixed-price contracts,” he told Business Times.
“The pain is real and it’s now.”
While Previndran described the current spike as a “temporary deviation”, he cautioned that the longer-term implications may persist even if crude oil prices eventually stabilise.
“Contractors repricing tenders today are building in risk premiums that won’t disappear when oil stabilises. Add rising labour costs and compliance requirements, and you have a permanently higher cost floor. Developers banking on a full reversal are taking a serious risk.
“As a seasoned developer said, when did a price rise for any reason and cause retreat after the reason?”
He argued that cost increases in the sector rarely reverse completely once embedded into the market, particularly when multiple inflationary pressures are at play.
To manage risks, Previndran urged developers and contractors to secure steel and other long-lead materials early, while renegotiating contracts to include cost-fluctuation mechanisms rather than relying on traditional lump-sum fixed-price structures.
“And if a project is marginal on returns today, defer it. Don’t launch into uncertainty.”
In the premium segment, he expects higher property prices to be more manageable, while the mass and mid-market segments may face greater challenges due to weaker demand sensitivity.
As a result, he anticipates fewer new project launches in the near term, though not necessarily at significantly higher selling prices.
On policy intervention, Previndran said government support should focus on maintaining supportive financing conditions, accelerating project approvals and addressing structural mismatches in affordable housing.
Deputy Economy Minister Mohd Shahar Abdullah said geopolitical conflict in the Middle East and disruptions to global energy flows have pushed crude oil prices higher, resulting in increased costs for the construction sector.
Speaking at the recent Malaysia Building and Property Summit 2026, he acknowledged upward pressure on steel, cement, transportation fuel and construction equipment costs, but described the current situation as a “temporary deviation” rather than a structural disruption.
Shahar said the World Bank
expects global commodity prices to rise by around 16 per cent
this year.
Still, he expressed confidence in Malaysia’s ability to weather external shocks, citing supportive financing conditions, resilient domestic demand and a continuing pipeline of investments.
However, concerns remain over how prolonged volatility could affect project execution.
During a panel discussion at the summit, Rahim & Co Chestertons director Siva Shanker said the unpredictability of global developments makes it increasingly difficult to assess the commercial outlook.
“That whole environment is so volatile, but I worry if it is going to escalate. I think we are going to be seeing some abandoned stuff. There is only so much you can absorb.
“We could start seeing some abandoned developments (and) this is very scary, commercially.”
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المصدر: New Straits Times