KUALA LUMPUR: Escalating tensions between the US and Iran have triggered a sharp divergence on Bursa Malaysia, with oil and gas equities rallying as aviation stocks slumped under the weight of surging fuel costs.
Analysts noted near-term oil price forecasts of roughly US$80 to US$90 a barrel as markets price in geopolitical risk.
They said investors may maintain selective exposure to the oil and gas sector as a hedge against rising geopolitical risks and potential supply shocks.
Tradeview Capital fund manager Neoh Jia Man said oil stocks are poised to see a near-term positive reaction following the outbreak of conflict between US and Iran.
"This is due to Iran's role as a major oil exporter and the strategic Strait of Hormuz, through which much of global oil supply passes.
"Any escalation threatening supply would typically lift crude oil prices and support oil and gas equities."
He added that investors should consider maintaining selective exposure to oil and gas stocks as a hedge against heightened geopolitical risks.
"The sustainability of the rally depends on the conflict's duration and intensity, and whether other Opec producers offset supply disruptions," said Neoh.
Areca Capital Sdn Bhd chief executive officer Danny Wong said high oil prices will boost upstream exploration and production earnings, increase Petroliam Nasional Bhd's revenues and government tax receipts.
"Upstream oil and gas service and equipment (OGSE) players benefit from higher capital expenditure.
"However, high prices raise downstream operating costs and increase consumer energy prices," said Wong.
He said Malaysia sits in an "interesting position" where it is an oil and gas producer as well as a significant net importer of refined products and petrochemicals.
"The net impact depends heavily on the scenario at the Strait of Hormuz. Unlike Western markets, the FBM KLCI is not uniformly harmed by Middle East conflicts.
"As a commodity-exporting, trade-dependent emerging market, Malaysia's stock exchange often benefits from oil price spikes while remaining vulnerable to a different set of risks entirely," added Wong.
Conversely, the downtrend in the aviation sector remains highly uncertain.
Neoh said aviation players are the biggest losers as they face a dual impact.
"Higher crude oil prices raise jet fuel costs, while Middle East flight-route disruptions can increase flight times and operating expenses.
"The sustainability of the sector's downtrend will largely depend on the duration and escalation of the conflict. At this juncture, the trajectory of the war remains highly uncertain," added Neoh.
SHARES MOVEMENT
Five oil and gas-related stocks dominated the top 10 gainers list on Bursa Malaysia at the closing bell.
On the most active list, three oil and gas related stocks closed in top 10, driven by rising demand amid the increase in oil prices.
Velesto Energy Bhd came in second, rising 3.28 per cent to 31.5 sen at the closing bell with more than 20 million shares traded.
Bumi Armada Bhd gained 11.11 per cent to close at 35 sen and Hibiscus Petroleum Bhd rose 18.13 per cent to RM1.89 at the closing bell.
Conversely, Capital A Bhd lost 8.77 per cent to close at 52 sen and AirAsia X Bhd dropped 11.62 per cent to RM1.75.
Meanwhile, Petron Malaysia Refining and Marketing Bhd topped the gainers list, rising 10.6 per cent to RM4.59. Petronas Chemicals Group Bhd surged by 13 per cent to RM3.39 with more than 22 million shares traded.
Hengyuan Refining Company Bhd jumped 17.58 per cent to RM1.07 and Petronas Dagangan Bhd rose slightly by 1.27 per cent to RM22.60