Kuala lumpur: Global markets, including those in Malaysia, are in urgent need of clear and consistent signals from U.S. President Donald Trump to ensure a sustained de-escalation of the ongoing conflict in West Asia and to restore stability, economists have stated.
According to BERNAMA News Agency, there remains uncertainty over whether the conflict involving the U.S., Israel, and Iran will come to an end soon. Although markets have shown some signs of stabilisation after more than three weeks of volatility, clarity is still lacking.
Mohd Sedek Jantan, the Director of Investment Strategy and Country Economist at IPPFA Sdn Bhd, remarked that Trump's recent announcement of a five-day postponement of strikes on Iranian facilities should be viewed more as a temporary measure for damage control rather than a significant change in geopolitical risk.
Meanwhile, Prof Emeritus Dr Barjoyai Bardai from the Malaysia University of Science and Technology highlighted that the postponement had an immediate calming effect on the oil markets, leading to a drop in global oil prices following the announcement.
A recent research report indicated that oil prices are expected to average around US$75 per barrel this year, with projections of US$65 to US$70 per barrel by 2027, assuming the conflict remains short-lived and oil supplies gradually restore.
Sedek noted that the temporary de-escalation announced by Trump had a noticeable but short-lived impact on global market volatility, particularly affecting energy prices. This was reflected in the futures market, where Brent crude oil prices fluctuated significantly.
Barjoyai added that while the temporary de-escalation reduces immediate conflict risks, it increases uncertainty due to unresolved strategic confrontations. He described the situation as a fragile and conditional pause, rather than a definitive turning point.
The potential for resurgent tensions could drive oil prices higher, leading to a gradual inflation impact in Malaysia. Sedek warned that rising energy costs could eventually affect consumers, particularly in energy-sensitive sectors, if elevated prices persist.
Barjoyai also noted potential disruptions to ASEAN supply chains due to geopolitical instability in West Asia, emphasizing the region's reliance on imported crude oil. While ASEAN may not face as severe exposure as East Asian economies, increased freight and insurance costs could have knock-on effects on production and trade.