Oil prices remain elevated as Middle East tensions threaten supply, with the Strait of Hormuz disruptions keeping markets on edge despite signs of stabilisation
PETALING JAYA: Oil prices are set to remain elevated as tensions in the Middle East continue to threaten supply, with disruptions at the Strait of Hormuz, one of the world’s most critical oil chokepoints, keeping markets on edge.
Economist Dr Geoffrey Williams said while higher insurance premiums due to the conflict have contributed to increased shipping costs, their overall impact on oil prices remains relatively small compared with broader concerns over supply security and refinery disruptions.
“Prices are likely to stay high as long as the conflict persists and the strategic waterway remains constrained.
“Although the market appears to be stabilising, with crude prices holding above US$100 per barrel (RM400) without further sharp spikes.”
Williams said this suggests that investors are anticipating a possible de-escalation in hostilities, with attention shifting towards efforts to reopen the critical route, which could eventually ease cost pressures and bring prices down.
“The market is now seeing some signs that the uncertainty is easing. Although the Strait of Hormuz remains affected by disruptions, the market has already priced in the risk,” he said, adding that oil prices have stayed stable at around US$100 per barrel.
He said while the situation remains tense, it is not escalating further and may be showing early signs of stabilisation, with some indications of a gradual move towards de-escalation.
Taylor’s University research cluster lead for innovative management practices Prof Dr Poon Wai Ching echoed similar views, saying rising insurance premiums are only one of several factors supporting higher oil prices, but not the main driver.
She said oil and gas prices are being supported by a “stack of overlapping factors”, including geopolitical risks, higher logistics and insurance costs, supply restrictions by the Organisation of the Petroleum Exporting Countries and its allies (Opec+) and resilient global demand.
“Even if some physical flows resume, such as through safe passage arrangements, financial and risk premiums remain elevated, keeping prices high,” she said.
Poon added that the current market is not driven by a single factor, but a layered pricing effect where multiple pressures reinforce each other.
“Geopolitical risk adds a fear premium, logistics and insurance raise transport costs, Opec+ limits supply and strong demand prevents prices from falling,” she said.
She added that even with partial improvements in access through the Strait of Hormuz, broader market pressures continue to keep prices elevated.
A Euronews report said shipping through the Strait of Hormuz is increasingly shaped by rising risks and costs as regional tensions disrupt normal transit.
