A Malaysian parliamentary group is scrutinizing ASX-listed Lynas Rare Earths' agreement to supply rare earths to the US, as lawmakers weigh implications for the nation’s foreign policy and strategic minerals sector.

Lynas operates the world's largest single rare earths processing plant in Malaysia.

A parliamentary special select committee met on July 16 to review the Australian company’s role in the US defence supply chain, according to a statement from the group on Friday. The session heard from ministry officials, non-governmental organizations, and Lynas executives, it said.

Lynas didn’t immediately respond to a call and email seeking comment.

Lynas is one of only two major rare-earth miners outside China, which holds a near-monopoly over the global supply chain. The Perth-based company — which has a mine and plant in Western Australia, as well as a facility in Malaysia and plans for a magnet factory — signed a binding letter of intent earlier this year to supply the Pentagon with rare-earth oxides over a four-year period.

The hearing followed a memorandum from more than 20 Malaysian civil society groups, including Greenpeace Malaysia, that urged tighter oversight of the country’s rare-earth supply chain. The coalition opposed Lynas’ Pentagon supply agreement, citing US military support for Israel’s war in Gaza.

The meeting was convened to “examine and assess the impact of the supply agreement, which is viewed as potentially affecting Malaysia’s reputation as a steadfast supporter of Palestine,” the committee’s statement said.

The committee recommended that the government develop a clearer foreign investment policy to safeguard the country’s national interests and sovereignty, and urged it to issue an official position on the matter within two weeks.

Rare earths are a group of 17 chemically related elements found in mineral form that have magnetic and optical properties useful for making electronics more efficient. Given their characteristics, they are deeply embedded in modern technologies, including an array of military-related applications.

Muslim-majority Malaysia doesn’t have diplomatic relations with Israel.