Oil prices top US$105 as Middle East supply risks mount

Middle East tensions and shipping disruptions have driven up oil prices, with Brent crude surpassing US$105 a barrel and US benchmark West Texas Intermediate (WTI) reaching above US$97 on Friday. Malaysia's energy and inflation risks could be further exacerbated by the ringgit's strength, which is currently around RM4.08 against the US dollar.

The Strait of Hormuz, a vital route for global energy supplies, saw a Singapore-flagged container ship sunk by an Iranian projectile, adding to concerns over the security of commercial shipping. Meanwhile, rising tensions between Saudi Arabia and Iran-backed Houthi forces in Yemen have raised uncertainty over regional oil production and exports.

Despite the International Energy Agency's commitment to release 100 million barrels under a coordinated intervention, the market remains sensitive to supply developments, with US crude inventories falling by 8.6 million barrels last week. This decline, the largest weekly decrease since February, has supported WTI prices, which are projected to outperform Brent for the week due to lower shipping costs for US crude.

For Malaysia, sustained increases in global crude prices could lead to higher fuel-import costs, affecting transportation, logistics, and production expenses, and potentially adding to inflation if the price rise persists.