Persistent West Asia Tensions Threaten Oil Price Stability, but Malaysia’s Energy Sector Remains Defensive
PETALING JAYA, April 27 — Prolonged geopolitical tensions in West Asia are raising fresh concerns over the stability of global oil prices, with investors increasingly wary of potential supply disruptions that could trigger further volatility in energy markets.
Despite these risks, RHB Research maintains that Malaysia’s energy sector continues to demonstrate resilience, supported by structural safeguards and a stable regulatory environment.
In its latest research note, the firm said that although global coal and gas prices have risen sharply due to geopolitical developments, the impact on domestic utility companies has remained manageable.
This is largely due to the Automatic Fuel Adjustment (AFA) mechanism, which allows energy producers to pass increased fuel costs on to end-users, thereby preserving margins and limiting financial strain on operators.
As a result, the energy sector continues to be viewed as a defensive investment, particularly in an environment marked by heightened uncertainty and external risks.
RHB Research added that the sector’s attractiveness is further reinforced by consistent dividend yields of between four and five per cent, making it appealing to income-focused investors.
The firm highlighted several preferred stocks within the sector, including Tenaga Nasional Berhad, YTL Power International, Solarvest Holdings and Samaiden Group.
It noted that rising global energy prices are expected to have a limited impact on Tenaga Nasional and other power producers, as a significant portion of fuel costs can be recovered through the AFA mechanism.
Based on current projections, the firm expects the upcoming tariff adjustment in July 2026 to involve only a modest increase of around 0.08 sen per kilowatt-hour, or approximately one per cent compared with existing rates.
While Tier-2 gas prices have increased, the impact is mitigated by a stronger ringgit and the availability of subsidised gas at lower prices.
From a cost perspective, coal prices were identified as having a more significant influence on electricity tariffs than gas, accounting for roughly 60 per cent of fuel costs in power generation.
In contrast, non-subsidised gas contributes only about nine per cent, with every US$10 increase in Brent crude prices estimated to raise the AFA by just 0.01 sen.
Looking at corporate performance, RHB Research expects Tenaga Nasional to record a year-on-year earnings growth of around nine per cent in the first quarter of 2026, supported by a lower effective tax rate and stronger returns from regulated assets.
The firm also highlighted that increased capital expenditure under the Regulatory Period 4 (RP4) framework is expected to strengthen the company’s long-term earnings outlook.
Meanwhile, YTL Power is seen as a key beneficiary of rising global energy prices, particularly through its retail electricity operations in Singapore, which are sensitive to price movements.
RHB Research estimated that every US$10 increase in Brent crude prices could boost the group’s pre-tax margin by approximately two percentage points.
In the renewable energy segment, Solarvest and Samaiden are projected to deliver stronger earnings growth, driven by increased solar project recognition and growing demand for clean energy solutions.
The firm also encouraged investors to capitalise on recent share price corrections, noting that the impact of changes in export tax policies on the solar sector is expected to be minimal.
Overall, RHB Research maintained an “overweight” rating on the energy sector, with Tenaga Nasional remaining a top pick due to its strategic role in the National Energy Transition Roadmap.
Despite ongoing geopolitical uncertainties, the sector’s protected cost structure and stable demand outlook position it as one of the most resilient and defensive investment options in the current market environment.
-wilayah.com.my
