PETALING JAYA: New offensive tactics targeting energy infrastructure and commercial ships in the Middle East threaten to disrupt global oil supplies, as attacks raise the risk of worsening supply shortages, higher energy costs and potential global stagflation.
See-sawing oil prices, which had come under renewed upward pressure amid fears of supply disruptions following attacks on Saudi Arabia and commercial vessels around the Strait of Hormuz, retreated yesterday after the US signalled it was considering easing sanctions on Russia’s so-called “shadow fleet” of tankers.
The potential move could lower freight rates and improve flexibility in diesel shipments, easing some supply concerns even as attacks on ships in the Middle East and Ukrainian strikes on Russian energy infrastructure continued to pose risks to global oil flows.
At the time of writing, the benchmark Brent crude futures contract fell by 2.22% to US$103.62 per barrel, while US West Texas Intermediate crude futures dropped 0.54% to US$94.58 yesterday, reversing gains from the previous session.
That said, oil prices still found support from Ukrainian attacks on Russian refineries and escalating hostilities between Saudi Arabia and Yemen’s Houthi rebels, alongside renewed attacks on commercial ships.
Iran has stepped up strikes on vessels over the past 10 days, as part of their new offensive tactics and expanding operations beyond the Strait of Hormuz to waters around the Gulf of Oman, Qatar and the United Arab Emirates.
Earlier this week, Houthi rebels struck the Saudi Aramco headquarters complex, fuelling concerns over potential disruptions to Saudi oil supplies.
Berjaya Research head of research Kenneth Leong told StarBiz that the recent escalation of conflict is deemed significant because it raises the risk of supply disruptions, rather than merely adding a geopolitical risk premium to prices.
This is given the Strait of Hormuz’s importance as a key energy shipping route.
Leong said investors should watch for factors like the volume of crude oil and refined products passing through the Strait of Hormuz, the frequency and severity of the attacks on commercial vessels and energy infrastructure.
Investors should also be observant of Saudi Arabia’s ability to maintain exports, the availability of spare production capacity and strategic reserves, along with any diplomatic or military developments that could ease or intensify the conflict, in the coming weeks.
“We would also watch out for changes in shipping and insurance costs, global inventory data and the response of major oil producers,” he noted.
According to UCSI University Malaysia finance associate professor and CME research fellow Liew Chee Yoong, the latest attacks are “worrying” because they raise the possibility that less oil will reach global markets.
Nonetheless, Liew said an attack on Saudi Aramco’s headquarters does not necessarily mean that oil production has been affected.
What matters is whether key facilities, such as processing plants, pipelines and export terminals, have been damaged, and how quickly any disruption can be resolved.
Liew said Brent crude could rise to US$110 to US$115 a barrel if attacks persist but oil deliveries remain largely unaffected, while prolonged shipping disruptions or damage to major export facilities could push prices to US$120 to US$130 a barrel.
A prolonged disruption affecting Hormuz and alternative routes could even cause a temporary spike towards US$150 or higher.
“These figures are possible scenarios, rather than firm forecasts. Prices could also fall below US$100 per barrel if tensions ease and shipments recover.
“The key is to look beyond the headlines and watch what is happening to actual oil deliveries. Are fewer tankers getting through? Are export terminals operating normally? Are insurers still willing to cover vessels at a reasonable cost?
“These developments will help show whether the market is mainly reacting to fear or facing a worsening physical shortage,” he said.
Meanwhile, Sunway University economics professor Yeah Kim Leng said crude oil prices persisting above US$100 a barrel is “unsettling” for the global economy.
Yeah cautioned that a prolonged oil price shock could trigger a global stagflation which would see a majority of countries experiencing slowdown, downturn or no growth amid rising inflation.
He noted that while the global economy was able to withstand the global supply disruption as a result of the closure of the Strait of Hormuz during the initial few months of the US-Iran war outbreak in February, the current oil supply shortages could be more severe.
“This is due to destruction of production and shipping capacity as oil tanker ships and facilities are being bombed, thereby worsening the global oil supply-demand imbalance.
“Back in February, there were coordinated releases of strategic petroleum reserves, oil production ramp-up in non-Gulf states, and moderating demand,” Yeah said.
Undoubtedly, persistent geopolitical tensions and elevated oil prices will reinforce expectations that the US Federal Reserve (Fed) will keep interest rates higher for longer, lending further support to the US dollar.
The latest US inflation print came in hotter-than-expected, accelerating to 3.7% year-on-year in September, up from 3.4% in August, driven largely by surging energy prices.
Leong said this does not bode well for the local stock market as it risks further foreign fund outflows.
Notably, foreign investors have already recorded 16 days of consecutive net outflows from Bursa Malaysia since Sept 23, 2026, totalling RM1.83bil.
“This risk is compounded by the possibility of higher inflation and interest rates, which could encourage global investors to reduce exposure to emerging-market equities, including Malaysian equities,” Leong said.
In terms of sector positioning, Leong said aviation, transportation and logistics, consumer discretionary, and other energy-intensive manufacturers are in a more vulnerable position, premised on their greater exposure to fuel costs, weaker consumer purchasing power and potential margin compression.
“Meanwhile, utilities could also face cost pressures depending on fuel pass-through mechanisms and regulatory arrangements. Conversely, upstream oil and gas companies could benefit from higher crude prices.
“Overall, we expect foreign fund flows to remain highly sensitive to developments in the Middle East, oil prices, the US dollar movement and global interest-rate expectations,” he said.
As for the ringgit, the impact is likely to be mixed, given the country’s position as a net energy exporter.
On one hand, higher crude oil prices could boost export receipts and support earnings among upstream oil and gas companies. However, these benefits may be partly offset by higher petroleum product import costs, potentially increasing the government’s fuel subsidy burden and adding pressure on the fiscal position.
“Over time, a prolonged escalation in geopolitical tensions could also prompt investors to shift towards US dollar-denominated assets and other safe-haven investments, exerting further downward pressure on the ringgit,” Leong said.
The ringgit ended yesterday at RM4.0820 per US dollar.
Liew concurred, noting that investors need to be cautious in assuming that higher oil prices will automatically strengthen the ringgit.
“A sharp escalation would initially leave the ringgit vulnerable against the US dollar, even with some support from energy exports.
“My main concern would be a prolonged conflict that keeps oil prices high while weakening business confidence and consumer spending. Some energy stocks could perform well, but the wider local market would still face pressure,” he said.
UOB senior economist Julia Goh said the bank expects Brent crude to average US$90 per barrel in 2026 and US$80 per barrel in 2027.
Goh noted that there is also a need to consider the higher subsidy bill for the government.
“The budget that was tabled projected RM73bil in subsidies and social assistance, a slight moderation from record high of RM75bil this year based on assumption of stable average oil price at US$85 per barrel.
“We assume the fuel subsidy bill to remain at around RM40bil unless oil prices veer significantly higher from these levels,” she said.
Another key risk to watch is US mid term elections next month and the Fed’s next Federal Open Market Committee decision as markets continue to reprice the timing of next interest rate hike.
“Widening interest differentials could weigh on the ringgit’s outlook given that that markets expect another two to three hikes from the Fed against one overnight policy rate hike by Bank Negara Malaysia,” she said.
