UOB Group Research head of markets strategy Heng Koon How said the current low crude oil prices do not reflect any geopolitical risk premium.
PETALING JAYA: If geopolitical risks in Iran intensifies, the near-term impact on crude oil prices is likely to be greater than that from Venezuela, where production has already been curtailed by years of US sanctions and any incremental changes are expected to be gradual.
By contrast, the Strait of Hormuz is a key route for global oil shipments, and any disruption could quickly ripple through global oil markets, say analysts.
Over the past week, the protests have intensified across Iran prompting questions about how crude oil prices might respond if unrest deepens or leads to a fundamental shift in the country’s political landscape.
While Venezuela holds the highest oil reserves in the world, UOB Group Research head of markets strategy Heng Koon How said that Iran is a much more substantial producer of crude oil than the former, and most of its exports now supposedly go to China.
In a report, he noted that the current low in crude oil prices does not reflect any geopolitical risk premium.
This is because the Organisation of the Petroleum Exporting Countries (Opec) is keeping energy markets well supplied and the supply overhang is dampening the impact of geopolitical tensions.
“Overall, we keep our modestly negative outlook for Brent crude oil, due to oversupply from Opec.
“Forecasts for Brent crude oil remain at US$65 per barrel in the first quarter of financial year 2026 (1Q26), US$60 for 2Q26 and US$55 for the latter half of financial year 2026.”
At the time of writing, oil prices edged slightly higher, with Brent futures up 28 US cents, or about 0.4%, to US$64.15 a barrel, while US West Texas Intermediate crude climbed to US$59.78, levels not seen since early December.
Traders said the gains reflect lingering concerns about potential supply disruptions amid rising unrest in Iran, after US President Donald Trump vowed to impose a 25% tariff on goods from countries “doing business” with Iran.
UOB noted that Iran currently produces an estimated 3.3 million barrels per day of crude oil or roughly one‑third of Saudi Arabia’s output.
In terms of production volume, Iran’s is much more substantial as it is about three times that of Venezuela.
However, it said Iran’s crude oil exports have been falling sharply since last month, as the United States has tightened sanctions on Iran’s “shadow fleet” of Very Large Crude Carriers that transport its crude oil.
Markets are also increasingly betting on a change in Iran’s leadership.
“On the prediction platform Polymarket, the odds of Supreme Leader Ali Khamenei leaving office have risen to 42% by the end of March, 51% by the end of June, and 60% by the end of December” the report stated.
Meanwhile, Maybank Investment Bank Research forecasts Brent crude oil prices to weaken, averaging US$ 65 per barrel in 2026 (versus 2025’s US$67), as oil markets are expected to remain in a supply surplus, largely due to extra volumes from Opec+ as it seeks to restore market share.
Turning to Malaysia, the bank expects Petroliam Nasional Bhd’s or PETRONAS’ domestic capital expenditure to remain subdued in 2026, due to weak oil prices and ongoing tensions with Sarawak-based peer Petroleum Sarawak Bhd.
As such, companies providing oilfield services and equipment in Malaysia may not see significant year-on-year growth in 2026.
The research house has a “neutral” weighting on the oil and gas sector.
