PETALING JAYA: Hong Leong Investment Bank (HLIB) Research expects ongoing geopolitical tensions in the Middle East and the resulting structural supply shock to keep energy prices elevated for much of 2026 and 2027.
The research house expects crude oil prices, based on the Brent benchmark contract, to remain elevated at above US$100 per barrel for at least five months, based on price behavior seen during the onset of the Russia-Ukraine war in 2022.
The primary catalyst for this sustained high-price environment is the crisis at the Strait of Hormuz.
Consequently, HLIB Research has revised its Brent crude assumptions upward to US$90 a barrel for 2026 and US$75 for 2027, and expects the improved price outlook to reshape earnings expectations for Malaysian energy counters.
It has maintained its “overweight” rating on the oil and gas sector.
HLIB Research expects the primary winners to be upstream and midstream players like Hibiscus Petroleum Bhd
and Dialog Group Bhd, given their direct exposure to Brent-linked realised prices.
Hibiscus, on which the research house has a “buy” call with a target price (TP) of RM2.74 a share, stands to benefit from higher crude oil and gas prices, with HLIB Research’s regression analysis indicating a strong 77% correlation between Brent prices and Hibiscus’ share price.
For every US$10 per barrel increase in Brent, Hibiscus’ share price is expected to rise by 34 sen, it noted.
Dialog (“buy”, TP: RM2.52), however, remains HLIB Research’s top pick in the sector. While the company benefits from 15% to 20% upstream earnings exposure, its strength lies in its diversified and resilient business model.
The research house noted that Dialog’s midstream segment provides stable, recurring income, while the current geopolitical climate is expected to accelerate demand for strategic storage capacity outside the Middle East.
HLIB Research added that this positions Dialog’s Pengerang operations as a significant long-term beneficiary.
The petrochemical sector is another gainer from the supply shock, as attacks on facilities in the Gulf have caused prices to spike for products such as polyethylene (plus 77%) and urea (plus 76%).
Hence, HLIB Research believes that Petronas Chemicals Group Bhd (PetChem) is well-positioned to benefit from rising average selling prices (ASPs) across its product portfolio.
PetChem also enjoys fixed gas based feedstock costs under a long-term agreement with Petroliam Nasional Bhd (PETRONAS) until 2030, the research house said. This allows it to enjoy margin expansion as product prices rise while input costs remain stable.
However, HLIB Research maintained a “hold” rating on PetChem (TP: RM6.30) due to uncertainties over the sustainability of elevated ASPs into 2027, as well as operational drags from its Pengerang Petrochemical Co unit.
Other notable “buy” calls in the sector include Bumi Armada Bhd (TP: 43 sen), Dayang Enterprise Holdings Bhd (TP: RM1.94) and MISC Bhd (TP: RM9).
While PETRONAS’ capital expenditure typically tracks Brent prices, HLIB Research noted that any ramp-up in spending may be gradual due to project lead times and ongoing uncertainties surrounding the PETRONAS-Petroleum Sarawak Bhd issue.
