KUALA LUMPUR, March 3 (Xinhua) -- Malaysia's economy is expected to remain broadly resilient amid escalating tensions in the Middle East, with research houses saying the fallout from the U.S.-Iran conflict would likely be contained under a baseline scenario.

RHB Investment Bank said in a note on Monday that the direct impact of the Middle East tension on Malaysia's economy is expected to be limited, given the country's relatively low trade and tourism exposure to the region.

"We maintain Malaysia's 2026 gross domestic product (GDP) growth forecast at 4.7 percent, with the growth to be underpinned by continued strength in domestic demand, robust external demand, and supportive government policies," said the research house.

Meanwhile, Hong Leong Investment Bank Research said that while higher oil prices will push Malaysia's petrol subsidy bill higher, it does not expect the government to alter its 2026 fiscal deficit target.

"We believe the government will still maintain its 2026 fiscal deficit target of -3.5 percent of gross domestic product (GDP), as this will be offset by higher oil-related revenue, while the government also retains the flexibility to reallocate expenditure, if necessary," said the research house.

According to the state news agency Bernama, Rabiatul Munirah, an economist from Universiti Teknologi MARA, said on Tuesday that Malaysia's exposure is less about direct bilateral trade links with the United States or Iran and more about second-round global spillover effects transmitted through commodity prices, capital flows, and investor sentiment.

On sectoral impact, she said if oil prices remain elevated, transportation and logistics, aviation, manufacturing, particularly energy-intensive industries, could face cost pressures due to higher fuel and input costs.