KUALA LUMPUR: A neutral impact is anticipated for Malaysia in the event of an oil price spike in case of escalation of the Middle East conflict, according to MIDF Research.
MIDF Research director and head Imran Yassin Md Yusof said that while higher oil prices could benefit the oil and gas players, it may also contribute to higher inflation.
“Of course, this will benefit oil-producing regions, especially those that are not in the conflict area (including Malaysia). We saw how commodity prices spiked last year with the onset of the new Ukraine-Russia conflict, many commodity producers benefited from that. I hate to say benefiting from conflict, but you know you can’t run away from the economics of it. So, oil and gas players benefited, palm oil producers benefited. So, in a way, the first round could be a benefit, but if the conflict continues, there is a cost,” he told the press at MIDF 2024 Market Outlook yesterday.
He explained that the rise in oil prices will also contribute to inflation, potentially impacting the economy by causing reduced consumer spending.
“Then, if the conflict goes on, shipping lanes will be affected, along with shipping costs, shipping insurance, and things like that. So that also will feed into inflation.
“So, basically, in the first round we may benefit, but if the conflict continues, then it will impact our economy in a sense. So whether it’s going to be a net effect good, gains or losses, remains to be seen in a sense,” he said.
He added that for the Middle East conflict to have a significant impact, there has to be an escalation in the conflict.
“As it stands, and based on past historical movements, the conflict has not boiled out or escalated with other players in the region,” he said.
Currently, MIDF Research official projection expects commodities prices to remain stable. It forecasts CPO and Brent prices to average RM3,600 per tonne and US$84 a barrel respectively for 2024.