Experts say global risks and tight supply keep crude and diesel prices high despite smoother Strait of Hormuz shipping
PETALING JAYA: Stabilising traffic through the Strait of Hormuz is unlikely to bring immediate relief to fuel prices, with economists saying deeper structural pressures, from geopolitical risks to tight inventories, would keep crude and diesel costs elevated.
Despite improving shipping flows through one of the world’s most critical energy chokepoints, experts say global markets continue to price in risk, limiting any near-term decline in prices.
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said crude and diesel prices are unlikely to ease significantly even as shipping activity through the strait gradually normalises.
“Markets continue to factor in risk premiums, tight inventories and the possibility of further disruptions.
“While some easing may occur in the coming weeks if flows continue to stabilise, prices are expected to remain elevated over the next one to three months before gradually moderating later in the year as supply rebuilds and inventories recover.”
He added that in Malaysia’s case, any cost savings from improved shipping conditions are unlikely to be fully passed on to consumers, as the government may retain part of the gains to ease its subsidy burden after a period of elevated spending.
“Such an approach is common, in which short-term savings are used to rebuild fiscal buffers rather than translating directly into lower pump prices, particularly for controlled fuels.”
He also said several factors could continue to keep prices elevated, including tight global inventories, ongoing geopolitical uncertainty and sustained regional demand, particularly from Asia.
“Diesel prices are also more sensitive to supply disruptions and have risen faster than crude due to refining and logistics constraints,” he said, adding that even limited disruptions or renewed tensions could contribute to a risk premium in energy markets.
Mohamad Idham said retaining part of any savings would support broader fiscal consolidation efforts, adding that subsidy expenditures had surged during periods of high oil prices.
Universiti Kuala Lumpur Business School economist Assoc Prof Dr Aimi Zulhazmi Abdul Rashid said securing crude oil supply from Gulf Cooperation Council countries offers short-term assurance, but does little to shield Malaysia from elevated global prices.
He said crude prices remain closely tied to developments surrounding the Iran crisis, with any de-escalation unlikely to trigger a sharp correction.
“Even if tensions subside, prices are not expected to fall significantly due to the damage already caused by the attacks.”
He added that Malaysia would continue to procure crude at prevailing global market rates, despite smoother passage for its vessels through the Strait of Hormuz.
“This only secures the oil tanker transport route for Malaysia – pricing remains dictated by global markets.”
Taylor’s University research cluster lead for innovative management practices Prof Dr Poon Wai Ching said the safe passage of Malaysian vessels through the strait is a positive diplomatic development, but has limited impact on global energy prices.
She said structural constraints, particularly on the supply side, continue to underpin high crude and refined fuel prices.
“While this eases a specific logistical constraint for Malaysia, it does not materially resolve the broader supply disruptions affecting global markets. Attributing price volatility solely to Strait of Hormuz disruptions would be an oversimplification.”
She added that refining capacity constraints and uneven distribution of processing facilities continue to amplify shocks in downstream markets, particularly for diesel.
She also pointed to damage to production infrastructure in key Gulf states, which has further delayed supply recovery.
“Full restoration of output could take months, even if geopolitical tensions ease. Any stabilisation in prices should be seen as relative rather than a return to pre-crisis levels, as multiple risks continue to support a persistent premium in global energy markets.
“In this environment, a rapid reversion to earlier price levels is highly unlikely,” she said, adding that future price movements would depend on geopolitical developments, the pace of infrastructure repair and broader supply-demand rebalancing.
On the domestic front, Poon said prolonged energy price volatility would continue to feed into inflation, particularly through transport, food and logistics costs.
