Malaysia To See Mixed Economic Impact From Oil Risk Premium Amid Current Iran-US Situation
By Rosemarie Khoo Mohd Sani
KUALA LUMPUR, Feb 28 (Bernama) -- Malaysia’s economic outlook amid the current situation between Iran and the United States will depend largely on whether there is any physical disruption to crude shipments through the Strait of Hormuz, said SPI Asset Management managing partner Stephen Innes.
“If we assume there is no physical disruption to flows through the Strait of Hormuz and that shipments continue uninterrupted, the impact on Malaysia would stem from a geopolitical risk premium embedded in oil prices rather than from an outright supply shock,” he told Bernama.
Innes said the distinction is significant because in a ‘risk premium only’ environment, crude prices rise due to heightened uncertainty rather than actual supply losses.
“Brent could therefore trend higher even though global supply remains intact.
“For Malaysia, the implications are more nuanced than in a true shortage scenario,” he said.
Innes said that as a hydrocarbon producer via Petroliam Nasional Bhd (Petronas), Malaysia stands to benefit marginally from firmer crude prices.
“As a hydrocarbon producer via Petronas, Malaysia stands to benefit at the margin from firmer crude prices.
“Higher oil supports export receipts, upstream earnings, and government-linked revenues.
“The trade balance would likely improve on paper, and the ringgit could find some relative support from stronger terms of trade,” he said.
Nonetheless, Innes cautioned that elevated oil prices, in the absence of supply disruption, would also increase domestic cost pressures.
“However, without a supply disruption, elevated oil prices function less as a windfall and more as a cost input.
“Domestic fuel pricing mechanisms, transportation, aviation, and petrochemical industries would still face higher operating expenses. Inflation expectations could edge higher, complicating the policy outlook,” he said.
Innes added that this could influence Bank Negara Malaysia’s (BNM) monetary policy stance.
“BNM may adopt a more cautious stance on easing if energy prices begin feeding into the headline consumer price index (CPI),” he said.
From an equity market perspective, Innes said the impact would be uneven, with energy-related counters likely to benefit while fuel-sensitive sectors face margin pressure, potentially limiting gains on Bursa Malaysia.
He also said the net result is not an outright boom but a balancing dynamic.
Energy-related equities, particularly upstream names, could outperform.
At the same time, sectors exposed to fuel and input costs, including airlines, transport operators, consumer discretionary, and manufacturing, may see margin pressure.
“In short, without a supply shock, Malaysia’s exposure is asymmetric but manageable: improved external balances on one side, and inflation and margin sensitivity on the other,” he added.
The situation in the Middle East escalated sharply as the US and Israel launched attacks on Iran on Saturday, with Israel describing it as a “pre-emptive strike” against its “arch-enemy” to “eliminate threats”.
The strikes followed a significant US military build-up in the region intended to pressure Tehran over its nuclear programme, as well as recent widespread protests.
-- BERNAMA