KUCHING: A leading economist has raised concerns about the escalating conflict in the Middle East, citing increased belligerence involving more countries.
Dr. Geoffrey Williams said the escalation is likely to raise market risks and uncertainty, prompting financial markets to seek safe havens.
“While the US remains a primary destination, Asian markets, including Singapore, are also expected to see increased investor interest,” he said.
He said the conflict would pressure the Ringgit and Bursa Malaysia as investors, particularly foreign investors, move towards safer markets.
However, this doesn’t indicate weakness in Malaysian economic fundamentals but rather speculative capital outflows to short-term safer markets, he said.
Meanwhile, Bank Negara Malaysia (BNM) has issued a statement indicating its intention to monitor the situation and adjust policies as needed – a positive intervention which should reassure markets.
Nevertheless, Williams believed that if there is no Israeli response or further attacks from Iran, or involvement of other countries like the United States and United Kingdom, things might calm down.
“Currently, it is a shock to markets, and we will see a reaction. At the opening, the Ringgit weakened from RM4.75 to RM4.78, but we’ll need to see what happens during the rest of the day. Bursa Malaysia fell by 0.6 per cent at the opening and has been falling for the last week, so it will likely remain weak under the current circumstances,” he said.
On possible impacts on product prices, the economist said it would take some time to manifest – as prices might be affected by changes in suppliers or longer transport routes and higher shipping costs.
Furthermore, there might also be an exchange rate impact pushing prices up.
“Oil prices have been rising all year and were quite stable until now. Besides, petrol and diesel prices are still subsidised in Malaysia, so immediate price changes are unlikely.
“These effects will likely be long-term; there should be no short-term impact on prices of goods and services for now,” he added.
Malaysia has strongly called on all parties in the Middle East to refrain from escalating the tense situation in the region due to the ongoing Israeli-Palestinian conflict.
Foreign Minister Datuk Seri Mohamad Hasan said while Iran claimed to act in self-defence by launching drones at Israel earlier in the day, the international community should not lose sight of ensuring the freedom of Palestine. His ministry has also issued an advisory to Malaysians currently in Iran, Jordan, Lebanon and Iraq to be prepared to have their schedules disrupted following the escalation of tensions between Iran and Israel earlier on Sunday
