Malaysia Morning Wrap | Middle East Tensions Rise as Israel Attacks Iran; U.S. Stock Index Futures Fall

The major U.S. stock indexes slightly increased on Thursday. This rise was attributed to low inflation news and optimistic outlook from Oracle, which mitigated the impact of President Trump's recent tariff threats on the market.

In May, the U.S. Producer Price Index rose by 0.1%, falling short of the 0.2% expected by economists.

The geopolitical situation in the Middle East has heated up dramatically with the Israeli attack on Iran. Israeli Defense Minister Katz said that missile and drone strikes targeting Israel and its civilians are expected in the near future following the Israeli attack on Iran. Gold, crude oil pull up in short term, spot gold breaks through the $3400 mark, U.S. stock index futures fell more than 1%.

The FBM KLCI rose for the second day in a row, boosted by buying in key stocks, even as investors remained cautious. The market experienced a negative breadth with more losing stocks than gaining ones (500 to 379). The total traded volume was 2.73 billion shares, worth RM2.1 billion.

On June 18, the Malaysian Minister of Investment, Trade and Industry Zafrul undertook a mission following his April 24 visit to the US, where he discussed key trade issues with senior US officials. Malaysia expressed its readiness to tackle the bilateral trade deficit, non-tariff barriers, technology protection, and the potential for a formal trade agreement. Seek tariffs below 10% for strategic sectors.

The Federation of Malaysian Manufacturing (FMM) warned that the expansion of the sales and service tax (SST) starting July 1 will impact most manufactured goods and services. The expansion of Malaysia's Sales and Services Tax (SST) means that about 97% of goods, including essential items for production upgrades and automation, will now be taxed. This move is expected to increase investment costs, potentially delaying business expansion and reducing investment enthusiasm in key sectors.

Malaysia's natural rubber production fell by 37.3% in April 2025 to 18,008 tonnes, down from 28,739 tonnes in March. Year-over-year, production declined by 15.6% from 21,325 tonnes in April 2024. Smallholders accounted for 86% of the national output, while estates contributed 14%.

HSBC's 2025 survey shows that Malaysian companies are facing higher trade costs and supply chain disruptions. Rising costs from tariffs and trade policies are a major concern for 55% of these businesses. In response, many are refocusing on domestic markets and increasing inventory levels to mitigate risks.