<p>This study investigates the significant yet complex relationship between financial market dynamics and oil price volatility, using Morlet wavelet analysis across two distinct periods (2011–2015 and 2016–2020), an approach not previously examined in the literature. The study outcomes demonstrate a dynamic interaction; initially, rising energy prices positively affect the Malaysian equity market due to increased corporate earnings and the role of energy as an inflation hedge. However, this influence wanes in the subsequent period, reflecting a changing market reaction to energy price fluctuations. Similarly, in the bond market, while short-term effects of energy price volatility are initially positive, they turn negative over the medium term, suggesting the critical importance of strategic energy pricing and diversification. The study also uncovered an underexplored role of interest rates in mediating these market reactions, offering new strategic insights for policymakers and financial practitioners for developing effective risk-mitigation strategies and prudent interest rate management, providing essential guidance for policymakers, investors, and financial practitioners to navigate Malaysia’s financial landscape in the context of global energy market fluctuations.</p>