Kuala Lumpur: Crude oil prices are expected to rise towards US$85 per barrel in the near term, driven by supply-side risks stemming from recent geopolitical developments, according to CIMB Securities Sdn Bhd.
According to BERNAMA News Agency, CIMB Securities stated that volatility is likely to remain elevated, adding that a disruption of 500,000 barrels per day in global supply could historically lead to a price surge of around US$10 per barrel. Historical events, such as the international sanctions imposed on Iran in 2011-2012, resulted in a supply loss of 1.4 million barrels per day and a US$30 per barrel increase in crude prices during that period. However, the current global oil market is better cushioned by available spare capacity.
CIMB Securities highlighted that the Organization of the Petroleum Exporting Countries (OPEC+) currently holds an estimated 5.7 million barrels per day of excess capacity, with Saudi Arabia and the UAE accounting for roughly 4.2 million barrels per day. Despite this cushion, the bulk of the oil supply is exported via the Strait of Hormuz, presenting a key vulnerability. Should the proposed closure of the Strait of Hormuz materialize, the risk premium could surge, potentially pushing Brent prices above US$100 per barrel.
The Iranian Parliament’s vote reflects a growing political push within the country to adopt a hardline stance, but the ultimate decision to close the Strait of Hormuz rests with Iran’s Supreme National Security Council. Enacting this measure would significantly elevate geopolitical risk in the Middle East, with potential repercussions for global oil supply chains.
The global oil supply is projected to grow by 1.5 percent to 104.35 million barrels per day in 2025, according to the US Energy Information Administration. The Strait of Hormuz facilitates the transit of approximately 20 percent of global oil consumption, underscoring its strategic importance. Asia is particularly exposed, with China, India, Japan, and South Korea being the top destinations for crude oil moving through the Strait of Hormuz, collectively accounting for 69 percent of crude oil and condensate volumes transported through the strait in 2024.
CIMB Securities opined that any disruption to these flows could drive a renewed surge in oil prices, with inflationary spillovers extending across global economies. Public Investment Bank Bhd (PIVB) also noted that uncertainty in the Middle East is likely to cause a spike in oil prices, as the region contributes 30 percent of the world’s total output, with Iran being the third-largest OPEC producer.
PIVB mentioned that if there is no material disruption to the global oil supply with the Strait of Hormuz remaining accessible, this may well be short-lived, as there is still ample supply of oil in the market. However, global demand could weaken due to a slowdown in international trade following an increase in tariffs. Despite this, the uncertainty and risk of escalation are likely to cause an immediate surge in oil prices, prompting investors to seek safe-haven assets and avoid risky investments such as equities.
PIVB added that while the US Consumer Price Index (CPI) remains under control, partly due to low energy prices, a protracted conflict in the Middle East could potentially lead to a sustainable rise in energy prices, increasing the likelihood of the US economy slipping into stagflation in the second half of 2025.