The recent increase in the price of crude oil following the rising tension in the Middle East is a boon for Malaysian oil and gas companies.
However, high oil prices can also trigger a resurgence of inflation and higher interest rates that can affect the global economy and Malaysia.
According to Monash University Malaysia economist, Niaz Asadullah said every geopolitical crisis is good news for oil and gas (O&G) companies because export prices tend to rise.
He also said that companies such as Petroleum Nasional Bhd (Petronas) will benefit in terms of windfall profits from the increase in oil prices. Higher dividends for the government but that could be offset by high subsidy bills for petrol and diesel.
Additionally, a major Israeli attack on Iran would see transportation costs rise to levels that would adversely affect local export and import volumes.
MIDF Research predicts oil prices to remain high at around $80 to $90 per barrel due to higher production support and higher demand in upstream project timeline management.
He said further, the reversal of this trend could depend on unprecedented events such as demand setbacks, global pandemics or growing regional conflicts in oil-producing countries.
The Organization of the Petroleum Exporting Countries (OPEC+) still has the power to control production to keep prices within a certain range even as US inventories are being replenished.
Over the weekend, Iran launched hundreds of drones and missiles in a retaliatory attack following Israel's attack on its embassy compound in Syria on April 1.
News reports say that a suspected Israeli drone hit a site in Isfahan last Friday. So far, Tehran has not flagged any plans to retaliate against its arch-enemy.
