Strait of Hormuz risks could push oil above US$100 per barrel, Asia most exposed
KUALA LUMPUR: The potential closure of the Strait of Hormuz could sharply escalate geopolitical tensions in the Middle East and severely disrupt global oil supply chains, with Asia facing the greatest exposure, according to CIMB Securities.
The research firm underscored the strategic significance of the strait, which handles nearly 20 per cent of global oil flows. With global oil supply projected to increase by 1.5 per cent to 104.35 million barrels per day in 2025, based on US Energy Information Administration (EIA) forecasts, any disruption could lead to widespread consequences for global energy markets.
"Asia is particularly exposed, with China, India, Japan, and South Korea being the top destinations for crude oil moving through the Strait of Hormuz to Asia, collectively accounting for 69 per cent of crude oil and condensate volumes transported through the strait in 2024.
"Any disruption to these flows could drive a renewed surge in oil prices, with inflationary spillovers extending across global economies," it said in a note.
It said crude oil prices are expected to rise amid recent geopolitical tensions, with heightened volatility likely to continue in the short term.
CIMB expects Brent crude to trade around US$85 per barrel in the near term, with volatility likely to persist amid elevated geopolitical risks.
"Our analysis indicates that a supply disruption of 500,000 barrels per day (bbl/day) could result in a price increase of approximately US$10 per barrel, based on historical events.
"The international sanctions imposed on Iran in 2011 to 2012 led to a supply loss of 1.4 million bbl/day, resulting in a US$30 per barrel increase in crude prices during that period. That said, the current global oil market is better cushioned by available spare capacity," it added.
CIMB noted that OPEC+ currently has an estimated excess capacity of 5.7 million bbl/day, with Saudi Arabia and the United Arab Emirates contributing around 4.2 million bbl/day of that total.
However, it highlighted a key risk: most of this supply is transported through the Strait of Hormuz, making it particularly vulnerable.
"In our view, should the proposed closure of the Strait of Hormuz materialise, the risk premium could surge, potentially pushing Brent prices above US$100 per barrel," it added.
The research house highlighted Dialog Bhd as a potential beneficiary of rising oil prices, mainly due to its upstream portfolio.
The company currently operates three producing assets, including full ownership of the Bayan oilfield service contract, a 20 per cent stake in the D35/D21/J4 production sharing contract, and a 50 per cent interest in the L53/48 concession in Thailand.
"These assets contributed approximately 35 per cent to Dialog's financial year 2024 core net profit. We estimate that every US$10 per barrel rise in the average Brent oil price assumption will boost Dialog's financial year 2026 core net profit by 2 per cent," it said.
CIMB's current forecast assumes an average Brent oil price of US$71 per barrel for 2025.
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