The latest surge in global freight and charter rates, driven by conflict in the Middle East and tighter vessel supply, is creating uneven implications for Malaysia’s listed maritime companies, with tanker-linked operators positioned to benefit more directly than port operators.
The disruption stems from constrained movement through the Strait of Hormuz, while continued security risks in the Red Sea are forcing vessels to avoid the Suez Canal and sail around the Cape of Good Hope, keeping effective shipping capacity tight.
That has pushed freight rates sharply higher.
Tanker rates on the Middle East-China route have climbed to about US$475,000 a day, while shipping crude from the US Gulf Coast to China now costs over US$29mil.
For MISC Bhd, elevated tanker earnings could support near-term charter income, given its exposure to energy transportation.
But for container-focused operators, gains are more selective.
Soon-to-be-listed MTT Shipping and Logistics Bhd managing director Ooi Lean Hin says domestic shipping remains relatively insulated from global freight volatility.
“For domestic trade, it is relatively stable and usually shielded from the volatility of freight rates. As seen during Covid-19 and the Red Sea crisis, freight rates did not move much,” he tells StarBiz 7.
However, MTT could benefit from new charter hire contracts if demand remains firm when some current charters expire.
Ooi says rising fuel costs are largely manageable due to a bunker adjustment factor that allows the company to pass fluctuations on to customers.
Vessel charter exposure remains limited, as MTT owns almost its entire fleet, with only one chartered-in vessel at a fixed rate.
The more immediate operational concern is congestion.
MTT warns that cargo disruptions linked to Middle East-bound shipments could create knock-on delays at regional ports, although mitigation measures are underway.
“Westports has announced that Middle East-bound vessels will not be allowed to discharge without confirmation of a second vessel.
“This measure should reduce cargo being stuck at the port.
“However, we still expect some level of port congestion and delays,” Ooi shares.
That aligns with the cautious tone from Westports Holdings Bhd executive chairman Datuk Ruben Emir Gnanalingam, who notes that freight rates themselves do not directly determine container volumes.
“Freight rates do not directly impact port volumes,” he says, adding that ships have already been routing via the Cape for several years, limiting further diversion upside.
Still, MTT expects prolonged tightness in container shipping.
“With tensions in both the Persian Gulf and the Red Sea, we are of the view that shipping capacity will remain tight and freight rates will stay elevated for a prolonged period.
“Even if the war ends, it will take time to clear the backlog,” Ooi says.
For Bursa Malaysia maritime counters, this means tanker-linked players may enjoy stronger earnings momentum, while port and container operators face a more operationally complex environment shaped by congestion, delayed turnaround times, and selective freight pass-through.
Pricier flight tickets expected for now
Having enjoyed a relatively calm period with mostly declining oil prices over the past three years near the US$60 level, airline operators have now received a rude awakening.
Should the Middle East conflict escalate further, airlines will have to brace for additional price shocks, with energy research consultancy Wood Mackenzie not ruling out an eventual rise in Brent crude to US$200 per barrel.
The aviation industry’s main operational fuel has spiked, with Brent crude nearly reaching US$120 per barrel last week, severely compressing airlines’ profit margins.
Prices had briefly fallen following US President Donald Trump’s announcement that the war might end sooner-than-expected, but have climbed again toward US$100 per barrel at the time of writing.
This comes despite the International Energy Agency planning to release a record 400 million barrels into the market.
Unhedged airlines such as AirAsia X Bhd (AAX) may consider locking in fuel hedges for at least part of their supplies amid heightened uncertainty.
AAX currently carries no fuel hedges, meaning it would absorb any cost surge.
Following the price shock, higher flight ticket prices and increased insurance coverage are likely to be the norm for the public in the near term.
Some carriers may incorporate heftier fuel surcharges while keeping base ticket prices stable to manage short-term volatility.
It is still too early to determine if this will dampen flight demand. During 2022, oil prices remained above US$100 per barrel, yet global travel demand surged after Covid-19 lockdowns eased.
This time, however, there is no pent-up post-Covid-19 demand. Security is emerging as a key factor.
Middle Eastern airports and flight pathways in the United Arab Emirates, Saudi Arabia, and Qatar – major transit points between East and West – appear to remain closed.
Iran continues to launch drones and missiles at Gulf neighbours, despite earlier apologies, leaving motivations and outcomes uncertain.
Apart from slightly lower demand due to rising ticket prices, Asian carriers on intra-Asian routes are unlikely to see significant dents in demand, as the conflict remains contained in the Middle East.
However, additional demand could come from farther destinations, especially if airlines increase capacity for passengers from regions such as the United States and Europe, who would have previously flown via Middle Eastern carriers to reach Asia.
Banks seen resilient amid tensions
Malaysian banks are expected to remain resilient and largely unaffected if the Middle East war ceases within a month or two.
However, it it prolongs, there could be some impact.
Sunway University professor of economics Yeah Kim Leng reckons if the war continues and the Strait of Hormuz remains shut beyond two to three months, a global slowdown or recession becomes inevitable due to energy supply shortages and skyrocketing prices.
“Given that the government has assured that the subsidised fuel prices will be maintained for two months, the inflationary impact on consumers will be less severe and consumer confidence can be maintained,” he tells StarBiz 7.
Economists say that a prolonged war, which increases the likelihood of an economic slowdown, could dampen lending to households – the bulk of bank loans – as consumers become more cautious, especially in home and motor vehicle purchases.
“In a similar vein, as long as business confidence remains intact, banks will still be able to achieve their lending targets.
“However, they may become more cautious and reduce lending activities if the economic outlook turns sour due to the continuing war.
“After expanding above expectations last year, both the Malaysian economy and banking system are in a strong position to cope with external shocks caused by the war in the Middle East.”
That said, some banks overseas have already started raising mortgage rates as a way to curb pressure on future earnings.
In the United Kingdom, the BBC reported that “lenders are lifting mortgage rates as they respond to changing predictions about the future direction of the Bank of England’s benchmark rate, which dictates borrowing costs.”
Before the war began, markets had been “expecting a cut in UK interest rates at some point this year.
“But these expectations vanished after rising oil prices raised the prospect of higher inflation.”
In Malaysia, analysts do not expect the same scenario – though this could change if the conflict worsens.
“Rising inflation may result in global central banks keeping interest rates elevated.
“Bank Negara Malaysia might also need to maintain tighter monetary conditions to rein in inflation if the war escalates,” an analyst says.
“This is, of course, in the bigger scheme of things.
“But from a more specific standpoint, Malaysian banks have very little direct exposure to Iran, largely due to global sanctions and strict regulations,” he adds.
One of the more immediate impacts could come via global financial market volatility.
“In a war, investors tend to become risk-averse and move their funds to assets considered safer such as US Treasury bonds, gold or silver,” the analyst notes , adding that this can result in capital outflows from emerging markets, including Malaysia.
“When foreign investors take out their money from Malaysian shares, bonds or other instruments, this can weaken the ringgit.
“Banks may be impacted as currency volatility increases risks in foreign-exchange transactions and cross-border lending,” he adds.
CPO gains lift plantation earnings
Concerns over supply disruptions and rising commodity prices have buoyed crude palm oil (CPO) prices, improving earnings prospects for plantation companies.
At the time of writing, CPO prices stood at RM4,332.50, with expectations that they will continue to hover around this range for the foreseeable future.
TA Research reckons higher crude oil prices could improve biodiesel blending economics, particularly in Indonesia under its B40 biodiesel mandate.
“Stronger biodiesel demand globally could tighten the overall vegetable oil balance, which may indirectly support palm oil prices, particularly if palm oil maintains a price discount relative to competing oils,” it says.
Rakuten Trade head of equity sales Vincent Lau notes that palm oil has historically retained its competitiveness against other edible oils.
Adding to that, tighter global vessel supply as ships reroute and shipping capacity becomes constrained could raise costs for vegetable oil imports.
“In contrast, palm oil exports from Malaysia and Indonesia benefit from significantly shorter shipping routes to major importing markets such as India and China,” TA Research explains.
That said, questions remain over how much the Iran war has affected the sector, as the Bursa Malaysia Plantation Index had already been performing strongly.
The index rose 13.49% over the past 12 months, outperforming the FBM KLCI.
In early January, CPO prices stood at RM4,222, while stockpiles in both Malaysia and Indonesia remained high in early February, supported by double-digit production growth.
Lau notes that after the war broke out, CPO prices rose in tandem with oil and other commodities amid concerns over rising shipping and logistics costs.
He adds that the RM4,000 range is a healthy level for palm oil producers.
“Most plantation companies are cash-rich, hence their regular dividends are sustainable,” he says.
“The larger integrated players are best positioned to support their earnings.”
That is not to say the sector is without risks if the conflict escalates.
Further disruptions to key shipping routes could dampen palm oil exports, while a global economic slowdown could weaken edible oil consumption.
“Conversely, a rapid easing of geopolitical tensions could lead to lower crude oil prices, which may weaken biodiesel demand and limit the upside to CPO prices.”
Rising fertiliser costs could also pose a risk to the sector.
Still, optimism remains.
TA Research believes the sector’s risk-reward profile has improved meaningfully, supporting its upgrade to “overweight” from “neutral”.