“Globally, every geopolitical crisis is good news for oil and gas (O&G) companies as export prices tend to rise,” said Monash University Malaysia economist Niaz Asadullah.
He said O&G giants like Petroleum Nasional Bhd (Petronas) will benefit in terms of windfall gains from elevated oil prices. This will translate into higher dividends for the government but that could be nullified by a higher subsidy bill for petrol and diesel.
On the flipside, Niaz said, a major Israeli attack on Iran would see an increase in freight costs to disruptive levels, adversely impacting local export and import volumes.
“Beyond the increase in oil prices, we have to factor in the second order effect of the conflict on shipping costs for countries like Malaysia where 90% of trade is maritime,” he told FMT Business.
“We’ve already seen a 50% drop in trade through the Suez Canal in the first two months of 2024 compared to a year earlier. I expect further drops and parallel increases in sea freight rates if the Red Sea shipping crisis intensifies.
“The worst-case scenario involves the risk of a global recession – a wider war would only intensify geopolitical tensions and disruptions to supply chains.”