Oil prices extend slide as West Asia supply risks ease

Oil prices continued their downward trend on Tuesday, as easing Middle East supply concerns and diplomatic efforts to resolve the US-Iran conflict reduced market pressures. Brent crude hovered near $100 per barrel, while U.S. crude was around $92, reflecting confidence that supplies through the Strait of Hormuz would persist despite the ongoing conflict.

Saudi Arabia had shipped approximately 2.9 million barrels of crude daily through the Strait of Hormuz over the past week, while satellite imagery revealed a record number of supertankers—equivalent to about 14 million barrels—at the country's Gulf export terminals over the weekend. This surge in tanker activity indicated that oil flows remained robust despite the tension.

U.S. President Donald Trump, who was set to speak at the United Nations General Assembly in New York that day, may also meet Iranian President Masoud Pezeshkian and discuss matters with Chinese President Xi Jinping during his visit to the region. The administration has additionally proposed a $5 billion fund to aid in rebuilding Middle Eastern infrastructure damaged by the conflict.

Simultaneously, the U.S. dollar gained strength as investors anticipated a more aggressive stance from the Federal Reserve, with the dollar index rising 0.21% to 100.43 following its highest level in nearly three months. The Federal Reserve had already lifted the federal funds rate by 25 basis points last week and is expected to raise it again before the year's end.

Federal Reserve officials, such as Chicago Fed President Michelle Bowman, remained open to inflation potentially cooling towards its 2% target, although they cautioned that further rate hikes might be necessary if inflation did not recede. Minneapolis Fed President Laurie Kashkari noted that high inflation was affecting economies across the board, not just oil prices.

The stronger dollar put downward pressure on the euro, pushing it to $1.1465 from $1.1483 against the U.S. dollar, and to $1.3369 from $1.3391 against the British pound. The U.S. dollar also climbed to 157.45 yen from 156.68 yen. Against the Malaysian ringgit, the dollar was traded at RM4.0771, a slight 0.02% decrease from the prior session, and remains 2.89% stronger compared to a year ago.

The euro traded at RM4.67703, up 0.05% from the previous session and 0.81% over the past four weeks. For Malaysia, the interplay between lower oil prices and a stronger U.S. dollar offers both potential benefits and challenges, offering relief from energy-related cost pressures while simultaneously elevating the ringgit's cost of importing dollar-denominated goods.