Oil prices are expected to retreat towards the US$80-per-barrel mark as energy flows through the Strait of Hormuz normalise, offering relief to governments, businesses and consumers, although Malaysians should not expect an immediate reduction in fuel prices or broader living costs.
Economists and industry experts said the easing of geopolitical tensions in the Middle East is already cooling crude prices, with Brent crude slipping below US$80 a barrel, reducing fears of a prolonged energy shock that had threatened to reignite inflation globally.
OCBC Senior ASEAN Economist Lavanya Venkateswaran said to BusinessToday that the easing of geopolitical tensions is expected to support a gradual normalisation in global energy markets.
“Our house view remains for energy flows within the Middle East to recover beyond mid-year, allowing oil prices to ease into the second half of 2026,” she said, while forecasting that Brent crude to average US$85.80 per barrel in 2026, before easing to around US$80 per barrel in the fourth quarter of 2026.
Lavanya noted that lower oil prices would provide welcome relief for policymakers and consumers after sharp increases in fuel costs where diesel prices rose by an average 83% year-on-year between April and June, while RON97 prices climbed about 50% over the same period.
While lower global crude prices are expected to translate quickly into lower diesel and RON97 prices, she cautioned that broader supply chain costs and persistent inflationary pressures could limit the overall decline in consumer prices.
“With global oil prices easing, the need to raise RON95 retail fuel prices has reduced. We expect RON95 prices to remain unchanged at RM1.99 per litre in the near term,” she added.
Meanwhile, Monash University senior lecturer Dr Andrew Woon expects oil prices to stabilise within a broad range of between US$75 and US$90 per barrel in the coming quarters, although a full return to pre-crisis conditions could take longer.
“Inventories need rebuilding and shipping costs remain elevated,” he said to BusinessToday.
Woon said lower oil prices should eventually improve consumer confidence and ease inflationary pressures, but warned that businesses are often slow to pass on cost savings to consumers.
“Many firms tend to hold inventories purchased at higher costs and may delay reducing prices even when input costs fall,” he said, adding that consumers may only feel the full benefits towards the end of this year or even next year.
He also expects the government’s subsidised RON95 price to remain at RM1.99 per litre, likely alongside the existing 200-litre monthly cap, as Putrajaya continues efforts to rationalise fuel subsidies.
On the other hand, economist Geoffrey Williams said markets have already begun pricing in the improved outlook, with oil prices slipping below US$80 per barrel.
“This should improve market sentiment, but for consumers nothing has changed because fuel prices are fixed,” he said.
Williams expects inflationary pressures to ease but warned that businesses may continue citing high operating costs to justify maintaining elevated prices.
“Having raised prices, many businesses are likely to keep them high rather than pass on savings immediately,” he said.
He added that while the market price of RON95 should decline alongside lower crude prices, motorists are unlikely to see any change at the pump because the retail price remains fixed. However, lower global oil prices would reduce pressure on government fuel subsidies and ease concerns over rising subsidy costs.
With oil markets stabilising and geopolitical risks receding, economists broadly agree that Malaysia’s inflation outlook is improving, although consumers may have to wait longer before seeing meaningful reductions in the prices of everyday goods and services.
