KUALA LUMPUR (March 4): Malaysian energy stocks ended a two-day winning streak on Wednesday, as profit-taking set in amid weak broader market sentiment following escalating tensions in the Middle East.

The Bursa Malaysia Energy Index, which tracks 32 stocks including oil and gas service providers, earlier climbed to a 13-month high of 817.32 during the morning session before reversing course to close 1.93% lower at 786.61. The FBM KLCI closed down 0.80% at 1,698.22. 

Among the energy-linked stocks, Bumi Armada Bhd (KL:ARMADA) fell 6.58% to 35.5 sen, while Velesto Energy Bhd (KL:VELESTO) slipped 3.03% to 32 sen.

Oil prices could be sharply higher if supply disruptions persist for several weeks, as each additional week would heighten concerns over sustained supply losses, said Malcolm Melville, a fund manager with British multinational asset management firm Schroders.

If access to the Strait of Hormuz is restricted for a period of four to five weeks, oil prices could rise to levels of around US$100 (RM394.80)-US$120 per barrel, he said, adding that a conflict protracted for months could send prices above previous all-time highs, up to US$150-US$200 a barrel.

Brent, the global benchmark for crude oil, is now US$83 per barrel on the Intercontinental Exchange after rising 13% since the start of the Trump administration's military action in Iran over the weekend.

The spike comes at a time of heightened concerns over the Strait of Hormuz, an Iran-controlled waterway for about 20% of global oil supply and roughly equal amount of liquefied natural gas.

Malaysia’s oil and gas sector “should also be attracting greater investor interest, especially those with directly-benefitting upstream assets” such as Dialog Group Bhd (KL:DIALOG), said Maybank Investment Bank.

A sustained rise in oil prices will also be a relief to PETRONAS, the national oil and gas company officially known as Petroliam Nasional Bhd, the research house said, adding that improved cash flows will boost services and equipment firms, most of which reported lower earnings in 2025.

From a macroeconomic perspective, CIMB Securities said Malaysia’s balance of payment could also benefit from its large liquefied natural gas export capacity amid the rising prices.

Every increase of US$5 per million British thermal unit could add about 1.23 percentage point to the current account as a share of economic output, according to the research house’s estimates.

Malaysia would be the only economy among the four top Southeast Asian countries to record a net improvement in its current account balance, “potentially supporting the ringgit even as regional peers see further deterioration”, the research house said.

If Brent crude reaches US$100 per barrel, CIMB Securities said, there may be room for the government to raise the subsidised fuel price to RM2.05 per litre from RM1.99 per litre.

Such a move could add about 10 basis points to headline inflation while reducing the annual subsidy bill by around RM1 billion, the research house noted. “The impact on inflation would remain manageable at this level, and we do not foresee a hike in the overnight policy rate even in this scenario,” it added.