Oil and gas (O&G) counters on the local bourse were the big winners as intensifying attacks between the two Middle Eastern foes show no sign of abating.
The leading gainers were Hengyuan Refining Co Bhd, up as much as 20 sen or 10.81% to RM2.05, Hibiscus Petroleum Bhd (14 sen or 8.4% to RM1.80), Deleum Bhd (11 sen or 7.1% to RM1.65), Dialog Group Bhd (eight sen or 5.1% to RM1.65) and Petron Malaysia Refining & Marketing Bhd (18 sen or 4.6% to RM4.06).
Petronas Gas Bhd – a big cap stock – inched up 20 sen or 1.12% to RM18.04.
Over the last two trading days, Hengyuan Refining was up as much as 19%, Hibiscus (16.1%), Deleum (13.8%), Dialog (9.3%) and Petron (8.6%).
Meanwhile, the FBM KLCI Energy Index rose 11.4 points or 1.5% to 751.86 as oil prices stabilised today after surging 7% on Friday.
However, some research houses view the boost to the share prices of energy firms as temporary.
Hong Leong Investment Bank (HLIB) said while the rally in oil prices may not be sustainable, it could offer temporary relief for upstream players who have suffered from weak realised prices since early April.
“If Brent crude sustains above US$70 per barrel, it could trigger a short-term re-rating across the oil and gas sector, particularly among upstream and service-related names,” it said in a note today, upgrading its sector outlook to “overweight” from “neutral”.
Brent futures inched down 58 cents, or 0.8%, to US$73.65 a barrel by 0900 GMT today, while West Texas Intermediate (WTI) futures dipped 51 cents or 0.7%, to US$72.47, according to Reuters.
Both benchmarks had jumped more than US$4 a barrel in earlier Asian trading before giving back gains.
Kenanga Research said that although crude oil prices are expected to remain high until Middle East tensions subside, the outlook for upstream service providers “remains cautious” due to the Organization of the Petroleum Exporting Countries (Opec) still having spare capacity to boost global supply.
Kenanga maintained its “neutral” stance on the energy sector, viewing upstream maintenance as the most resilient segment due to its stable demand.
The research house favours Keyfield International Bhd, citing its younger offshore support vessel (OSV) fleet as a competitive advantage in securing charters.
It added that if geopolitical tensions persist, Hibiscus could benefit due to its sensitivity to oil prices, while MISC Bhd stands to gain from longer tanker routes resulting from disruptions in global oil trade flows.
Iran’s ‘nuclear option’
Market analysts remain wary that the Israel-Iran conflict could escalate out of control as both adversaries have begun targeting each other’s oil and gas infrastructure.
“Markets are on high alert, justifiably fearing a rapid escalation in the conflict that may spiral into an unbridled war,” Mizuho head of Asia ex-Japan macro research Vishnu Varathan said in a recent report.
He said “oil looks vulnerable” to a further squeeze on any Iranian response, alluding to a blockade of the narrow Straits of Hormuz where about 20% of all global oil supply moves through daily.
He warned the “nuclear option” for Iran involving a blockade of the key waterway could send Brent to as high as US$150 per barrel.