PETALING JAYA: Malaysia is bracing for potential spillover risks as a broad sell-off sweeps across Asian markets, driven by rising oil prices and escalating tensions in the Middle East, even as local markets were shut during public holidays in conjunction with Hari Raya Aidilfitri.
Regional sentiment has turned cautious, with investors pulling back from equities and currencies across emerging Asia.
According to Reuters, stocks in the region have come under sustained pressure, while currencies weakened as oil prices held above US$110 (RM432) a barrel, raising concerns over inflation and economic stability.
The MSCI Emerging Markets Asia index has fallen sharply this month, down more than 11%, putting it on track for its worst performance since late 2022.
The decline reflects growing unease over the impact of prolonged conflict in the Middle East, particularly on energy supplies and costs.
For Malaysia, the immediate impact may be less visible due to market closure, but the broader implications are harder to ignore.
As a trading nation with deep links to regional supply chains, the country remains exposed to shifts in investor sentiment and imported inflation, especially through higher fuel and food prices, the Reuters report said.
Analysts note that much of emerging Asia is vulnerable because of its reliance on imported energy.
The surge in oil prices is not only pushing up fuel costs but also affecting fertiliser supply, which could feed into higher food prices across Southeast Asia if the conflict drags on.
Across the region, the pressure is already evident. South Korea’s stock market saw steep losses, while its currency slid to levels not seen since the global financial crisis. Taiwan and Singapore also recorded declines, with investors increasingly moving to safer assets.
Currency markets have been equally fragile. The Thai baht has weakened to a 10-month low, while the Indian rupee slipped to a record low against the US dollar.
The Philippine peso, too, is hovering near historic lows, underscoring the strain on emerging-market currencies.
Market watchers say foreign funds have been steadily exiting key Asian markets since the conflict began, particularly in North Asia.
Large-scale selling by global investors and hedge funds has added to the downward pressure, as concerns grow over prolonged instability, the report said.
Still, Malaysia’s position as an energy producer offers a partial buffer. Higher oil prices could support government revenues and certain sectors of the economy, even as businesses and consumers face rising costs.
Looking ahead, the Reuters report said much will depend on how the geopolitical situation evolves. Any further escalation could deepen volatility across markets, while a stabilisation in oil prices may help ease pressure on currencies and equities.
For now, the region – including Malaysia – remains on edge, caught between the upside of stronger commodity prices and the downside of a more uncertain global economic outlook.
 The Sun Malaysia
