Morgan Stanley’s March 2nd Conference Call — Escalating Geopolitical Tensions, Oil Price Risk Premium ~$7/bbl: Hormuz Shipping Disrupted but Remains a 'Manageable Concern'; AI Competition Escalates into a Global Power Struggle

1. Reduced shipping efficiency through the Strait of Hormuz may cut global oil supply by 2–3 million barrels per day. U.S. military action against Iran has significantly heightened geopolitical risks in the Middle East. One of the market’s top concerns is the safety of shipping through the Strait of Hormuz—the world’s most critical energy transit corridor. Approximately one-third of China’s crude oil imports pass through this strait. Real-time monitoring—including satellite imagery and AIS maritime data—shows no physical damage to infrastructure in the strait, nor has it been fully closed. However, shipping efficiency has clearly declined. Current observations include: — Only a small number of LPG (liquefied petroleum gas) vessels continue transiting; — Many crude oil, refined product, and LNG tankers are slowing down, rerouting, or even turning back; — War-risk insurance premiums have surged ~50% in the short term. Under these conditions, Morgan Stanley’s commodities team estimates that if reduced efficiency persists, global oil supply could fall by 2–3 million barrels per day. The key variable is not whether supply declines—but how long any disruption lasts. 2. Historical precedent suggests a prolonged closure of the strait is highly unlikely. Although short-term volatility is pronounced, Morgan Stanley’s investment strategy team judges the probability of a long-term strait closure to be very low. Historical experience offers important reference points. For example, during the Iran–Iraq War in the 1980s—despite extremely intense conflict and roughly 400–450 tankers attacked—the strait remained open. Key reasons include: — A prolonged Iranian blockade would also sever its own oil export capacity; — As the world’s largest energy importer, China has a major stake in keeping the waterway open; — The U.S. likewise needs to maintain stability in global energy markets. Thus, from the perspective of great-power competition, all major actors possess strong incentives to preserve unimpeded passage. 3. Oil price risk premium ~$7/bbl; $80/bbl oil price constitutes a 'manageable concern'. The market has already priced in some of this risk. Morgan Stanley estimates the geopolitical conflict has added a risk premium of approximately $7 per barrel to oil prices. A supply shortfall of 2–3 million bpd would correspond to an oil price level near $80/bbl. This level is defined as a 'manageable concern'—not a panic-level energy crisis. Macroeconomic impact: For every $10/bbl rise in oil prices: — Global CPI rises by 0.3%–0.7%; — Global GDP falls by 0.1%–0.2%. Yet overall, the impact remains within the global economy’s tolerance range. II. Global Economic Impact: Pronounced Structural Divergence Across Asia 1. Southeast Asia faces the greatest inflationary pressure; China and Japan see relatively minor effects. Oil price increases affect Asian economies in markedly divergent ways. If oil prices rise $10/bbl, Morgan Stanley estimates: Southeast Asian countries experience the sharpest CPI increases: — Indonesia: +~0.9 percentage points — Malaysia: +0.8 percentage points — Thailand: +0.7 percentage points By contrast, China, Japan, and Hong Kong face much smaller impacts: — CPI increases of ≤0.3 percentage points Reasons include differences in energy structure and inventory buffers. 2. Both China and the U.S. possess energy shock absorption capacity. China, for instance: — Has steadily increased strategic petroleum reserves over the past two years during periods of lower oil prices, building up inventory buffers.

AI Boom Shields Malaysia Against Energy Shocks; Country Posts 6% Q2 Growth—Second-Highest in ASEAN

I. Malaysia’s GDP Growth at 6%, Outperforming Market Expectations The AI boom and energy shocks have triggered marked growth divergence across the six major ASEAN economies. Malaysia posted 6% year-on-year GDP growth in Q2 2026—ranking second among ASEAN’s major economies, behind only Vietnam’s 8.39%. According to media-reported data, Vietnam led Southeast Asia with Q2 growth of 8.39%. Malaysia and Singapore followed closely with 6.0% and 5.9%, respectively—driven primarily by robust demand for semiconductors and related components. Indonesia recorded 5.29% growth in Q2 (fourth place), while the Philippines grew by 2.3%—slightly above Thailand’s 1.9%, though both face mounting pressure from elevated energy costs driven by Middle Eastern conflict. Additionally, sharply reduced infrastructure spending further weighs on Philippine growth. ASEAN Six Economies: Q2 2026 GDP Growth Rates 1. Vietnam: 8.39% (top in ASEAN) 2. Malaysia: 6.0% 3. Singapore: 5.9% 4. Indonesia: 5.29% 5. Philippines: 2.3% 6. Thailand: 1.9% II. The AI Wave Emerges as Malaysia’s New Growth Engine Why does AI matter for Malaysia? Because AI development requires: 1. Data centers 2. Chip supply chains 3. Cloud computing infrastructure 4. Reliable power supply 5. Industrial land Malaysia happens to possess all five. 1. Rapidly rising data center investment Global AI firms are seeking locations that offer: • Lower land costs than Singapore • Stable electricity supply • Proximity to Asian markets • Business-friendly policies Malaysia has become a prime destination. Specifically: Johor Key advantage: Just one bridge away from Singapore. Singapore: • High land costs • Elevated electricity prices • Regulatory constraints on data center expansion Johor: • Ample land availability • Abundant power resources • Proximity to Singapore’s financial hub Thus emerging as a symbiotic model: 'Singapore demand + Malaysian capacity.' Recent collaborations—including YTL Power and Johor-based enterprises developing integrated data center parks—underscore continued momentum in Johor’s digital infrastructure investment. 2. Penang benefits from semiconductor upgrading Penang has accumulated over 50 years of expertise, hosting major international investments from: • Intel • AMD • Bosch • Infineon • Keysight This has fostered a comprehensive electronics manufacturing ecosystem. Now, with global semiconductor supply chains undergoing realignment—driven by U.S. efforts to reduce overreliance on single regions—and European, Japanese, and U.S. firms actively scouting for Southeast Asian production bases—Penang has emerged as a top choice. Hence Penang’s evolution: Past: Electronics assembly hub Present: Semiconductor R&D + advanced manufacturing center III. Why Is Malaysia Outperforming Other ASEAN Economies? Four key factors explain this: 1. Sustained increase in foreign direct investment (FDI) Global firms are executing 'China+1' supply chain diversification strategies. Malaysia’s advantages include: Factor Manifestation Political stability A mature ASEAN economy English-language environment Regional business communication advantage Ethnic Chinese business networks Strong linkages to the Chinese market Manufacturing experience Over 50 years of industrial foundation Land costs Lower than Singapore’s Making Malaysia a pivotal node for Japanese, European, American, and Chinese enterprises entering ASEAN.

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