Markets on edge amid Middle East tensions and Hormuz oil chokepoint fears

 By Sharen Kaur

Published in NST, March 6, 2026 

Investor sentiment remained fragile as markets grappled with the risk of prolonged disruptions to Middle East energy supplies following the coordinated US–Israel strikes on Iran, Tehran’s retaliatory threats against US allies, and the temporary closure of the Strait of Hormuz – a critical chokepoint that handles roughly one-fifth of the world’s crude oil. REUTERS PIC

KUALA LUMPUR: Investor sentiment remained fragile as markets grappled with the risk of prolonged disruptions to Middle East energy supplies following the coordinated US–Israel strikes on Iran, Tehran's retaliatory threats against US allies, and the temporary closure of the Strait of Hormuz – a critical chokepoint that handles roughly one-fifth of the world's crude oil.

Wall Street, however, staged a technical rebound on Wednesday, with the Dow Jones Industrial Average climbing 0.49 per cent, the S&P 500 gaining 0.78 per cent, and the Nasdaq jumping 1.29 per cent.

The rally was fuelled by stronger-than-expected ADP private payrolls data, which suggested robust job growth in the US, alongside a solid ISM Services PMI reading that indicated ongoing expansion in the services sector, according to Hong Leong Investment Bank (HLIB).

"Sentiment was also boosted by reports that Iran had signalled openness to talks and a pledge by Trump to steady oil markets. Nevertheless, investors remain cautious as protracted oil-supply disruptions in the Strait of Hormuz (a strategic corridor that carries roughly one-fifth of global crude supply) could lift gas prices, fan consumer inflation and slow household consumption," the bank said in a note.

HLIB added that such shocks could constrain the Federal Reserve, increasing the likelihood of smaller rate hikes or a pause as policymakers balance inflation pressures against growth concerns.

Locally, the FBM KLCI resumed its downward trajectory, shedding 13.73 points on Wednesday to 1,698.2, following a prior-session rebound of 11.7 points.

HLIB noted that a firm breach below 1,684–1,664 could trigger deeper consolidation toward 1,638, while a reclaim above 1,730 would revive upward momentum, paving the way toward 1,754–1,771 resistance zones.

"Although consensus views suggest the ongoing Middle East conflict is unlikely, for now, to trigger a systemic global shock, investors remain on high alert,"" HLIB said.

The bank said that rising energy costs, renewed inflation risks, and potential disruptions to key trade routes continue to create a fragile macro environment. Trump has indicated the military campaign could last four to five weeks, but any extension could amplify economic strain through sustained oil price increases, firmer inflation, and tighter financial conditions.

"Against this fluid geopolitical backdrop, particularly given the uncertain scale and duration of the conflict, we maintain a defensive stance, favouring domestic-centric sectors with resilient earnings visibility," the bank said.

HLIB is favouring domestic-centric sectors with resilient earnings visibility, with top picks including CIMB Group Holdings Bhd, Tenaga Nasional, Telekom Malaysia Bhd, Gamuda Bhd, Sunway Bhd, IHH Healthcare Bhd, Dialogue Group Bhd, OSK Holdings Bhd, SD Guthrie Bhd, AEON Co. (M) Bhd, Kimlun Corp. Bhd, Focus Point Holdings Bhd, Yenher Holdings Bhd, and MCE Holdings Bhd.

In response to heightened geopolitical risk, investors have already taken profits on select counters, closing positions in Legenda Properties Bhd (+3.6 per cent) and Dayang Enterprise Holdings Bhd (+9.0 per cent).