MISC BERHAD INTEGRATED ANNUAL REPORT 2025 08 11 09 05 12 SEC 06 STRATEGIC REVIEW 10 07 13 01 02 03 04 56 www.miscgroup.com 57 www.miscgroup.com #deliveringProgress OUR OPERATING ENVIRONMENT OUR OPERATING ENVIRONMENT Throughout 2025, the global energy and maritime landscape was shaped by heightened geopolitical tensions, rising trade policy uncertainty and evolving decarbonisation regulations. Ongoing conflicts, sanctions and shifting trade alignments continued to reshape energy flows and shipping patterns, while renewed tariff measures and protectionist policies introduced additional uncertainty across global trade and investment decisions. At the time of reporting, the situation in the Middle East has intensified further, impacting energy supply chains, trade routes and freight market dynamics. The extent of disruption remains uncertain and will largely depend on the intensity and duration of the conflict. Meanwhile, the advancement of regional decarbonisation measures alongside delays in the voting on the adoption of IMO’s Net-Zero Framework (NZF), has added complexity and heightened regulatory uncertainty for the global shipping industry. SHORT TO MEDIUM TERM GLOBAL ECONOMY What Happened in 2025 The global economy operated amid heightened trade policy uncertainty, moderating inflation and evolving monetary policy conditions across major economies. Renewed tariff measures and reciprocal trade actions among major trading nations contributed to increased policy uncertainty, influencing global trade flows and investment sentiment. Despite these headwinds, global economic activity remained resilient, with the International Monetary Fund (IMF) estimating global gross domestic product (GDP) growth at approximately 3.3%, supported by steady consumption and continued expansion across emerging markets. Inflationary pressures eased gradually, allowing major central banks to adopt a more cautious policy stance. The United States Federal Reserve maintained relatively elevated interest rates through the first half of the period before implementing measured rate cuts later in the year, lowering the target benchmark rate to 3.50% - 3.75% by year-end. While financial conditions improved modestly, policy and economic uncertainty remained elevated, continuing to influence investment decisions across markets. 600 500 400 300 200 100 2010 2012 2014 2016 2018 2020 2022 2024 Monthly Global Economic Policy Uncertainty Index E2 Source: Economic Policy Uncertainty (EPU) SHORT TO MEDIUM TERM GEOPOLITICS What Happened in 2025 Geopolitical developments remained a defining feature of the operating environment in 2025, reinforcing volatility across global energy markets and maritime trade. Ongoing conflicts in the Middle East and the prolonged Russia–Ukraine war continued to reshape crude and gas trade routes while heightening security concerns around key maritime chokepoints, including the Strait of Hormuz and the Red Sea. Alongside these developments, expanded sanctions targeting Russian and Iranian energy exports further altered fleet deployment patterns and increased operational complexity across the shipping industry. E1 Impact: Geopolitical tensions elevated operational and security risks across several trading regions. At the same time, shifting trade patterns and longer voyage distances contributed to stronger tonne-mile demand across certain tanker markets. Response: The Group prioritised the safety of its seafarers and assets through continuous monitoring of geopolitical developments, structured risk assessments and risk-based vessel routing decisions. Close engagement with customers, insurers and relevant authorities supported timely decision-making to safeguard crew wellbeing, protect asset integrity and maintain operational continuity. In addition, the Group’s secured income strategy, anchored on long term charters with strong counterparties across a diversified portfolio, provided resilience and largely insulated earnings from short term market volatility. Geopolitical uncertainty is expected to intensify in 2026, largely driven by a major escalation in the Middle East, resulting in the closure of the Strait of Hormuz, a critical maritime chokepoint for global energy markets and seaborne trade. While the trajectory of the ongoing conflicts remains uncertain, geopolitical considerations are expected to continue influencing trade patterns, energy security priorities and operational risk conditions across the maritime industry. How We Were Impacted and How We Responded What Is the Outlook? R1 R2 R7 Key Capitals: Material Matters: Risks: Strategic Pillars: M5 M11 SP1 SP2 Impact: Heightened policy uncertainty has contributed to a more cautious business environment, influencing investment sentiment and capital allocation decisions. Our Response: The Group remained selective in capital deployment, prioritising projects supported by long-term contractual visibility and strong counterparties. This resilience is further reinforced by a diversified portfolio, providing protection against market volatility. At the same time, the Group maintained prudent management of borrowings through a predominantly fixed-rate and long-tenure structure to support cost predictability and cash flow stability. The global economy is expected to remain highly volatile in 2026, as escalating geopolitical tensions in the Middle East and the closure of the Strait of Hormuz are likely to keep oil and gas prices elevated. Sustained high energy prices could fuel inflation, weigh on economic growth, and heighten the risk of a global recession, while potentially keeping monetary policy tighter for longer. Prolonged instability in the region may also dampen cross-border investment, strain supply chain resilience, and weaken overall global demand, amplifying downside risks to economic growth. How We Were Impacted and How We Responded What Is the Outlook? R1 R2 R4 Key Capital: Material Matter: Risks: Strategic Pillars: SP1 M11 SP2
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