KUALA LUMPUR (June 16): Energy stocks soared on Monday as the escalating conflict between Israel and Iran entered its fourth day with no signs of easing, raising fears of a broader war in the oil-rich region.

Leading the gains were Petron Malaysia Refining & Marketing Bhd (KL:PETRONM), which rose 14 sen or 3.6% to RM4.02; Deleum Bhd (KL:DELEUM), up 11 sen or 7.1% to RM1.65; Hibiscus Petroleum Bhd (KL:HIBISCS), up 10 sen or 6% to RM1.76; Dialog Group Bhd (KL:DIALOG), up seven sen or 4.5% to RM1.64; Hengyuan Refining Co Bhd (KL:HENGYUAN), up six sen or 3.2% to RM1.91 ; and Coastal Contracts Bhd(KL:COASTAL), up four sen or 3.1% to RM1.35.

The FBM KLCI Energy Index climbed 11.4 points, or 1.5%, to an over two-month high of 752.16, driven by sustained strength in West Texas Intermediate (WTI) crude oil, which hovered around US$72 (RM305.50) per barrel at the time of writing. The rally in energy stocks also provided a boost to the broader FBM KLCI, which added 1.88 points to close at 1,519.99.

Hong Leong Investment Bank (HLIB) revised its 2025 Brent crude oil forecast to US$67 per barrel, reflecting a higher geopolitical risk premium in the near term.

HLIB said while the rally in oil prices may not be sustainable, it could offer temporary relief for upstream players who have suffered from weak realised prices since early April.

If Brent crude sustains above US$70 per barrel, it could trigger a short-term re-rating across the oil and gas sector, particularly among upstream and service-related names, the research house noted. As a result, HLIB upgraded its sector outlook to "overweight" from "neutral".

HLIB named Dialog as its top pick, expecting the stock to be re-rated once it secures long-term tank terminal contracts under Phase 3 of the Pengerang Deepwater Terminals (PDT) project.

Meanwhile, Kenanga Research noted that although crude oil prices are expected to remain high until Middle East tensions subside, the outlook for upstream service providers remains cautious due to the Organization of the Petroleum Exporting Countries (Opec) still having spare capacity to boost global supply.

Still, Kenanga maintained a "neutral" stance on the sector, viewing upstream maintenance as the most resilient segment due to its stable demand.

Kenanga favours Keyfield International Bhd (KL:KEYFIELD), citing its younger offshore support vessel (OSV) fleet as a competitive advantage in securing charters despite a potentially tougher 2025.

If geopolitical tensions persist, the research house said Hibiscus could benefit due to its sensitivity to oil prices, while MISC Bhd (KL:MISC) stands to gain from longer tanker routes resulting from disruptions in global oil trade flows.