Oil slips on Trump’s Iran remarks, but supply risks and strong US dollar keep markets on edge

Oil prices dipped on Friday following remarks from US President Donald Trump suggesting progress in his talks with Iran, though the threat of potential military conflict and disruptions to oil shipments via the Strait of Hormuz continued to cast a shadow over the market. Brent crude fell beneath US$104 per barrel, while West Texas Intermediate (WTI) crude edged closer to US$91, pulling back from a significant rally on Thursday that saw gains of up to 5.7% and 5.6%, respectively.

Trump stated that Washington was actively engaged in discussions with Tehran and pledged not to launch an attack on Iran prior to the US midterm elections. He also asserted that record volumes of crude were flowing through the Strait of Hormuz, yet warned that the US naval blockade of Iranian ports would remain unyielding. Nonetheless, revelations that the US had prepared plans for three days of strikes against Iranian drone and missile stockpiles, energy facilities, and other targets heightened the risk of a resurgence in hostilities.

This uncertainty was further exacerbated by intensified Iranian attacks on tankers traversing the Strait of Hormuz, with nine vessels reportedly targeted in the last week, sparking apprehensions over the safety of a vital corridor for international oil transport. Meanwhile, Hurricane Isaias posed a threat to offshore oil production in the Gulf of Mexico, leading producers to curtail roughly 1.3 million barrels per day of crude output and adding to concerns about potential supply constraints.

In foreign exchange markets, the US dollar benefited from expectations that the Federal Reserve would maintain higher interest rates for a longer period due to the challenge of containing inflation, which could be exacerbated by elevated energy prices. The US dollar index was trading near 102.2 on Thursday, close to its peak since April 2025.

Fed Governor Christopher Waller indicated that additional rate hikes would likely be required to bring inflation back to target, although the precise timing remained unclear. Fed officials hinted at a 78% probability of maintaining current rates in October and a 69% chance of a 25-basis-point hike in December. Despite minor fluctuations, the ringgit experienced a slight decline of around 0.6% against the US dollar over the past month, although it remained about 3.2% stronger compared to a year ago.

For Malaysia, the dual impact of volatile oil prices and a resilient US dollar exposes markets to contrasting influences: geopolitical events could jeopardize energy supplies, while predictions of stricter US monetary policy continue to impact currency dynamics.