KUALA LUMPUR, April 8 -- The Malaysian government's decision to further adjust the BUDI95 allocation would be a sensible fiscal move amid the US-Iran war, but could pose a significant political risk for Prime Minister Datuk Seri Anwar Ibrahim's coalition ahead of a rumoured snap poll, according to a new report.

An analysis by GeoQuant, a FitchSolutions company, on the politics of fuel subsidies in Southeast Asia said that while Malaysia's move to adjust monthly subsidised fuel quotas from 300 to 200 litres helps control costs, prolonged high oil prices could force further unpopular measures.

The war, which began in late February, has driven up global oil prices by over 33 per cent, putting immense pressure on Malaysia's policy of cappin...