World oil prices surged again after the United States launched a new attack on Iran, raising concerns about global oil supply disruptions.
Brent crude oil rose to $79.28 per barrel, while West Texas Intermediate (WTI) crude oil traded at $74.76 per barrel. Both benchmarks are now at their highest levels in more than two weeks.
The price surge occurred after US President Donald Trump announced that the interim agreement with Iran had ended and hinted that military action would continue.
At the same time, the US military confirmed new attacks on several locations in Iran under the pretext of ensuring that shipping lanes in the Strait of Hormuz remained open. Iranian media also reported several explosions in Bandar Abbas, Abu Musa, Bushehr and several other areas.
The conflict escalated after Iran attacked ships in the Strait of Hormuz and also launched attacks on US military bases in Bahrain and Kuwait, which were later retaliated by Washington.
The Strait of Hormuz is a strategic route that handles nearly 20% of the world's oil supply. Any disruption in the area could affect global supply and push oil prices higher.
Maritime authorities have also raised the threat level for ships passing through the Strait of Hormuz to 'Red', raising concerns about the security of the world's energy trade route.
If the conflict continues, oil prices have the potential to rise even higher. This could affect fuel costs in many countries, including Malaysia.
RON95 Price Predicted to Rise, Calm Only Temporary
For Malaysia, this development is of particular concern as the retail price of RON95 is currently at RM3.37 per litre. Although the price is controlled by the government, the continued rise in crude oil prices will cause the government to increase the subsidy costs.
Since the conflict in the Strait of Hormuz erupted, the government has reportedly been spending about RM3.2 billion a month to ensure that subsidized fuel prices remain stable for consumers. If Brent prices continue to approach or exceed US$80 per barrel, the subsidy burden is expected to increase further.
Based on current trends, if Brent remains in the range of US$79 to US$82 per barrel until this weekend, the RON95 price for next week's setting could potentially be revised higher.
The range that the market is currently concerned about is around RM3.40 to RM3.45 per liter, depending on the movement of crude oil prices, the ringgit exchange rate and the pricing mechanism used by the government.
However, if the conflict escalates and Brent manages to break through the US$85 per barrel level, the pressure on the retail price of RON95 is expected to be greater, thus increasing the possibility that the government will either bear higher subsidies or make price adjustments to reduce the fiscal burden.
