KUALA LUMPUR: Bursa Malaysia’s energy index, which tracks oil and gas-(O&G) related shares on the local bourse, jumped as much as 36.71 points or 2.9% yesterday to its all-time high of 1,300.83 points, as crude oil prices breached US$70 (RM287.70) a barrel.

The index pared some gains to settle at 1,291.25, which is 27.13 points or 2.15% more than last Friday, marking the index’s highest market closing score since its inception in 2018. It was one of only two gainers among Bursa indices — the second being the real estate investment trust index, which rose 0.1% or 0.94 points to 968.85 — as O&G counters climbed amid the oil price rally.

In contrast, the broader FBM KLCI benchmark index was in the red. It closed 0.85% or 13.62 points lower at 1,597.76, as global equities took cue from heightened Middle East tension sparked by the US air strike in Iraq — the second largest producer among the Opec.

The incident, together with US President Donald Trump’s threat on Sunday of sanctions on Iraq, heightened concerns of a widening Middle East conflict that could disrupt oil supplies from a region that accounts for about half the world’s oil production.

At Bursa, O&G counters topped the most actively-traded list, led by Alam Maritim Resources Bhd and followed by Sapura Energy Bhd, Velesto Energy Bhd, Hibiscus Petroleum Bhd and Daya Materials Bhd. At press time, Brent crude, which earlier reached US$70.73, gave up some gains and was trading at US$69.65.

FXTM chief market strategist Hussein Syed said a drone attack on Saudi Arabia’s Abqaiq crude-processing plant sent Brent crude prices soaring, but those gains were quickly reversed as production was restored and markets viewed the attacks a short-term risk event.

“In the current environment, it’s hard to tell whether we’ll see a larger disruption in oil supplies that could send prices much higher,” said Hussein in a brief note. Still, he noted that some investors are buying call options for Brent crude futures near US$100 a barrel to insure or profit from massive price spikes.

“They are predicting that Iran will target shipping in the Strait of Hormuz, which is responsible for a fifth of the world’s oil supply flow. If this strait is blocked, even for a short period, it will lead to prices skyrocketing. At US$70 to US$80 a barrel, the global economy is not likely to feel much impact from this rise in prices, but as we get closer to US$100 there will be severe consequences, which would trigger steep sell-off in equity markets,” Hussein said.

Another asset he forecast will benefit from escalating Iran-US tensions is gold, which was trading 0.49% or US$7.74 higher at US$1,576.99 an ounce at the time of writing.

“The yellow metal has breached last year’s high and resistance level of US$1,557 and looks to be heading towards the psychological level of US$1,600. In times of political and market uncertainty, there is no better alternative to buying gold and despite looking overbought on the charts, the rally will continue as long as uncertainty stays high,” he added.

As such, he predicts investors will continue to remain defensive, and equity markets in the US and Europe are likely to follow Asian markets, as a possible retaliatory response by Iran is awaited. “This may not be an immediate one, but rather a protracted event which investors need to carefully calculate when determining their portfolio’s risk,” added Hussein.