The ongoing tensions in the Middle East are unlikely to pose a significant threat to Malaysia's economy due to its minimal direct trade exposure to the region, according to CIMB Securities.
The firm said only 2.2 per cent of Malaysia's total trade is with Middle Eastern economies, while trade with Iran, the central player in the current conflict, accounts for a negligible 0.09 per cent.
"Malaysia's direct trade exposure to the Middle East remains small. This significantly limits the immediate downside risk to exports or broader trade flows, even if geopolitical tensions escalate," it said in a research note.
The conflict between Iran and Israel, which has raised concerns over global oil supply security, has pushed up crude prices in recent weeks.
However, CIMB Securities noted that previous episodes of Middle East-linked oil price surges have tended to be short-lived.
It added that Malaysia, as a net exporter of crude oil and liquefied natural gas (LNG), could even see a modest trade benefit in the short term if prices remain elevated.
"In the near term, Malaysia may benefit from improved terms of trade as higher oil and LNG prices support export earnings, which in turn would bolster the trade surplus and current account balance," it said.
Despite this, the potential benefit may be partly offset by higher costs for imported refined fuels such as diesel and petrol, which Malaysia continues to import to meet domestic demand.
Rising freight rates and logistical bottlenecks, particularly those linked to disruptions in the Red Sea and Suez Canal, could further add to import costs.
"Elevated logistics costs may translate into higher import prices, even if direct trade exposure is limited," the firm said.
"However, unless a major supply shock materialises, such as the closure of the Strait of Hormuz, the impact on Malaysia's economy is expected to be limited and manageable," it added.
Source: NST