May 2026 Market Outlook

Fragility of the Ceasefire on Strait of Hormuz

Two months after the attack on Iran, the Strait of Hormuz remains effectively closed and oil prices continue to stay elevated. A ceasefire was agreed in early April, but subsequent negotiations have failed to produce meaningful progress. The United States has also maintained pressure outside the Strait of Hormuz in an effort to weaken Iran’s economy and prevent vessels from passing through the strait on Iran’s terms. As a result, persistently high oil prices could place further pressure on the global economy, weaken growth, and lift inflation expectations, leaving Malaysia’s economy in a more challenging and externally vulnerable operating environment.

On a more constructive note, the summit between Xi Jinping and Donald Trump in China in May could become an important catalyst for broader geopolitical de-escalation, which includes the re-opening of the Strait of Hormuz. This could help improve business confidence, reduce supply-chain disruption, and lower logistics costs, ultimately strengthening overall investor sentiment toward domestic assets in Malaysia.

Resilient, Stronger Tone on Capital Market

April marked a turning point in global markets as S&P 500 rose 10.5%, reversing the drop of March of 4.2%. Both the Nasdaq and the S&P 500 reached fresh record highs during the month. Although oil prices continued to fluctuate in response to developments in the Strait of Hormuz, but the underlying strength of the U.S. economy, resilient corporate earnings, and the firm labour market supports the steady upward trend for the stock market. S&P 500 companies reported a blended net profit margin of 13.4% for the first quarter, the highest level since 2009. Optimism over the potential productivity gains from artificial intelligence continued to serve as a major engine of market sentiment. This strong external backdrop provided support to Malaysia market, with the FBM KLCI gaining 2.7% to close at 1,722.02, reflecting improved investor sentiment and continued confidence in Malaysia stable macroeconomic environment.

Quality-Led Resilience In The Property Market

Malaysia’s property market remained resilient. Residential demand continued to be driven by domestic buyers and policy support, while occupier demand in the office segment shifted further toward higher-quality buildings. Industrial and logistics assets remained the strongest structural performers, with data centres standing out as the clearest long-term growth driver. According to JLL’s Q1 2026 data, Greater Kuala Lumpur office occupancy improved to 82.5% in the city centre, 93.5% in the fringe, and 78.3% in decentralised areas, reinforcing the view that the market is still being shaped by a “flight to quality” in favour of newer, greener, and better-connected assets. Meanwhile, retail conditions were stable supported by festive spending and resilient footfall. The tenant remixing, higher operating costs, and more cautious consumer behaviour continued to keep landlords cautious in their outlook.

Infrastructure-Led Repricing for Property Market

In Johor, continued progress surrounding the Johor-Singapore Special Economic Zone added further support to industrial parks, logistics assets, supporting office demand, and higher-end residential catchments. Most importantly, AirTrunk announce for a further US$3 billion investment in two new hyperscale data centres in Johor Bahru lifted its total Malaysia commitment to around RM27 billion and more than 700MW of capacity, reinforcing Johor’s position as Malaysia’s most compelling digital-infrastructure and industrial-property growth corridor.

Firm Policy Anchor for Property Market

Policy support for homeownership remained in place under the Budget 2026 framework, including the extension of stamp duty relief for first-home buyers, a higher 8% stamp duty on residential transfers involving non-citizens, tax incentives for commercial-to-residential conversions, and RM20 billion in housing credit guarantees. In April, the policy focusses more toward execution than the introduction of new cooling measures. Government’s housing task reported that it had successfully revived 1,501 delayed, sick, and abandoned housing projects, include 176,687 units with a gross development value of RM140.87 billion. At the same time, Housing and Local Government Minister Nga Kor Ming said the housing projects were expected to remain on schedule, with some relaxation of requirements to further facilitate implementation, particularly for affordable housing. Overall, these policies benefit Malaysia’s property market by sustaining homebuyer demand, improving financing access, reducing project completion risk, and strengthening confidence on both the demand and delivery sides, providing a firmer underlying support for Malaysia’s property market.

Conclusion

Overall, the market remains constructive despite a fragile external environment. The prolonged disruption at the Strait of Hormuz continues to pose upside risks to oil prices, inflation expectations and global growth. However, resilient global equity markets, stronger corporate earnings, and optimism over potential geopolitical de-escalation have helped stabilise investor sentiment. For Malaysia, the property market remains resilient, supported by infrastructure-linked and quality-led locations, particularly those benefiting from data centre expansion, logistics growth, urban transit development and the Johor-Singapore Special Economic Zone. Malaysia’s stable macroeconomic environment and firmer policy support provide a strong foundation for sustained property market confidence.