Investors Should Diversify Portfolios Amid Oil Price Volatility - Asia School Of Business CEO

By Muhammad Fawwaz Thaqif Nor Afandi

KUALA LUMPUR, March 10 (Bernama) -- Investors should diversify their portfolios and consider shifting towards low-risk, higher-quality investments during periods of uncertainty caused by volatile oil prices, according to Asia School of Business chief executive officer and president Prof Joseph Cherian.

He said diversification remains key for investors during volatile periods, noting that gains in energy-related investments due to rising oil prices amid the war in West Asia might help offset losses in sectors such as consumer cyclicals.

“That is why people need to diversify because energy will compensate for the cyclicals. Instead of holding the pure equity fund, buy high-quality funds that pay high dividends,” he told Bernama after appearing on Bernama TV's The Nation programme hosted by Jessy Chahal today.

He said such an approach represents a form of “smart investing”, where investors temporarily shift towards stronger, larger-cap companies with stable earnings and dividends during uncertain market conditions.

Volatility in global oil prices, which have recently fluctuated above the US$100-per-barrel level, could disrupt business planning, investment decisions and economic outlook across the region, according to Cherian.

He said sharp and unpredictable movements in oil prices create significant uncertainty because fossil fuels remain a critical input across almost every sector of the economy, from transportation and manufacturing to energy production and consumer goods.

Crude oil prices yesterday shot through the US$100 per barrel level amid a mounting supply crisis caused by the war in West Asia but West Texas Intermediate (WTI) crude fell to US$81 per barrel after US President Donald Trump declared that the war will end soon.

“Any uncertainty in commodity prices, especially fossil fuels which are very important inputs in the production and consumption process, is not good,” he said.

He said swings in oil prices make it difficult for businesses and consumers to plan with confidence, as erratic price movements can cause companies to delay or reconsider major investment decisions due to rapidly changing cost structures.

“Oil prices could be below US$100 today and above US$100 tomorrow. That kind of uncertainty affects the planning process because if the cost is too high, a profitable operation becomes unprofitable, so businesses have to plan in the short term instead of the long term,” he added. 

However, Cherian said the economic impact of rising oil prices differs significantly depending on whether a country is a net producer or a net importer of oil, with resource-rich economies potentially benefiting from higher crude prices.

Malaysia, as a net oil producer, stands to gain from higher oil prices through stronger export earnings and increased economic returns linked to the energy sector.

In contrast, he said, economies that rely heavily on imported oil are more vulnerable to price increases because higher energy costs raise production expenses and living costs, putting greater pressure on their economic growth.

Cherian noted that the impact of oil price volatility also varies across industries and financial markets, depending on whether companies benefit from higher energy prices or rely heavily on oil as a production input.

Companies in energy-related sectors could see improved performance during periods of rising oil prices, while industries such as manufacturing that depend on fuel for operations may face rising production costs.

Meanwhile, consumers may also feel the effects of higher oil prices through inflationary pressures and shifts in their spending patterns.

“When oil prices go up, inflation and the cost of living goes up and economic growth goes down,” he said, explaining that households may cut back on discretionary spending as living expenses rise.

He noted that sectors linked to consumer discretionary goods and services could be particularly affected during periods of rising energy prices as consumers postpone or avoid purchasing non-essential items such as luxury appliances and other discretionary goods.

-- BERNAMA