KUALA LUMPUR (Nov 3): Malaysian energy stocks hit a two-week low on Tuesday as oil prices slumped amid news reports of a potential US-Iran peace deal.

Oil and gas services firm Dialog Group Bhd (KL:DIALOG) closed seven sen or 3.27% lower at RM2.07, for a market capitalisation of RM11.7 billion.

Petrochemical firm Hengyuan Refining Company Bhd (KL:HENGYUAN) fell as much as 25 sen or 6.5% to hit an intra-day low of RM3.58, before paring some losses to close at RM3.69. At its last price, the company is valued at RM2.21 billion.

Meanwhile, the Bursa Malaysia Energy Index, which tracks 34 stocks in the sector, declined by over 1%.

Still, the market appears “undecided at this juncture on whether we will see a full ceasefire or continued war”, said BIMB Securities analyst Azim Faris Ab Rahman.

Brent, the global benchmark for crude oil, fell nearly 8% to US$104.75 per barrel on Monday following news of negotiations to end the months-long Iran war.

Barely hours later, however, the Associated Press reported that the US has carried out “limited defensive” strikes against Iranian targets in the Strait of Hormuz.

Investors may need “to start pricing in an in-between scenario — neither peace nor war”, said BIMB Securities’ Azim. “Under such a scenario, energy prices are likely to remain elevated, and energy stocks remain a good hedge against an inflationary environment,” he added.