Iran’s decision to give Malaysia the ‘green light’ to pass through the Strait of Hormuz should be seen as a positive development in the energy supply chain.
The previously high-risk route is now officially open, thus giving an early indication that the flow of crude oil can return to stability.
However, the market reality shows otherwise when global oil prices still remain high and show no significant decline.
This situation raises questions among local consumers, especially when Malaysia is seen as no longer facing direct obstacles to obtaining supplies through the strategic route.
The global oil market does not depend on a single factor alone, but is instead driven by a combination of risks, hidden costs and far more complex future expectations.
Risks of the Route Still High Despite Opening
Despite the permission being given, the Strait of Hormuz is still classified as a high-risk zone due to geopolitical conflicts that have not completely subsided. Threats such as drone attacks, missiles and sabotage against merchant ships still exist and can occur at any time without warning.
In this situation, approval only means permission to pass, not a guarantee of complete safety.
The risk of random attacks has led many shipping companies to take a cautious approach, with some even refusing to use the route even though it is technically open.
The global market sees this risk as a major factor supporting the continued high price of oil, as any minor disruption can have a major impact on global supply.
Insurance and Logistics Costs Continue to Pressure Prices
One of the least-considered factors is the cost of maritime insurance, which soars sharply in conflict situations. War insurance premiums increase significantly and in some cases, insurers refuse to provide cover to ships passing through high-risk areas.
The lack of insurance coverage means ships cannot operate, disrupting trade flows even when the route is open. For ships that are still operating, the high insurance costs are passed directly into the cost of shipping oil.
In addition, shipping companies are also faced with increased logistical costs such as longer alternative routes, longer travel times and delays at ports due to strict security checks. All of these additional costs ultimately contribute to higher oil prices on the global market.
Oil Prices Determined by the Global Market, Not Just Malaysian Routes
Malaysia does not operate in a closed system when it comes to oil prices. Instead, the prices paid by local consumers depend on global crude oil prices determined by international supply and demand.
The Strait of Hormuz plays a crucial role in the world's energy ecosystem as about one-fifth of global oil supply passes through the route. Any disruption, even minor, will trigger supply concerns and push up global prices.
This situation has left Malaysia still affected despite having access to the route, as other countries are also competing for alternative supplies. Increased global demand amid uncertainty will continue to support oil prices at high levels.
Hidden Factors and Domino Effects on the Economy
In addition to physical risks and logistical costs, there are various hidden factors that also affect oil prices. These include disruptions to infrastructure such as ports and storage terminals, technical navigation problems at sea, and delays in the unloading process due to additional security measures.
At the same time, the strength of the US dollar during the crisis has also put pressure on importing countries such as Malaysia. The weak currency has led to higher import costs even though global oil prices have not changed drastically.
This has created a layered pressure on the economy, with consumers facing not only higher fuel prices, but also higher costs of other goods due to higher transportation costs.
This situation suggests that permission to pass through the Strait of Hormuz will not necessarily lead to lower oil prices in the near term. Global markets are more concerned with the level of risk, geopolitical stability and overall supply chain costs than simply access to routes.
As long as uncertainty persists, oil prices are likely to remain supported at high levels, thus explaining why consumers in Malaysia have yet to feel the positive impact of these developments.
