SHAH ALAM, June 18 — The Strait of Hormuz’s reopening could help ease pressure on global oil prices and offer some relief to consumers struggling with rising living costs, said economist Prof Emeritus Barjoyai Bardai.
However, the impact is unlikely to be immediate, as global oil prices are influenced by various factors, including market demand, existing supply levels, and the oil reserves maintained by major importing countries.
“Realistically, consumers are expected to begin feeling the initial effects within three to six months, particularly in related sectors such as airfares, container shipping charges, and industrial transportation costs.
“That period is influenced by several factors, including the use of existing stock that was purchased at higher costs, logistics contracts that were fixed in advance, and the time required for businesses to adjust their selling prices,” he told Media Selangor.
On June 14, United States (US) President Donald Trump announced that an agreement with Iran had been finalised, paving the way for the reopening of the Strait of Hormuz and the lifting of US naval restrictions.
Meanwhile, Pakistan's Prime Minister Shehbaz Sharif said that the US and Iran reached a peace agreement following intensive negotiations, with the official signing ceremony scheduled for June 19 in Switzerland.
Although the effects on the cost of living may not be felt right away, Barjoyai said the reopening of the Strait of Hormuz could help contain inflation, lower businesses' operating costs, and reduce upward pressure on goods prices.
While oil prices are expected to decline, the cost of living in Malaysia is unlikely to change dramatically, as it is also affected by other factors such as the value of the ringgit, labour costs, rental rates, utility expenses, disruptions in global supply chains, and market structures.
He noted that the reopening is expected to lower logistics and transportation costs, including reduced insurance premiums and shorter delivery times, benefiting the trade, retail, and manufacturing sectors as a whole.
“Previously, we saw shipping and airline companies facing higher fuel costs, war-risk insurance premiums, longer alternative routes, and extended delivery times.
“However, when the route returns to normal, fuel costs have the potential to decrease, insurance premiums can be reduced, supply chain efficiency will improve, and delivery times will become shorter,” Barjoyai said.
He added that the reopening is more than just a geopolitical issue; it is a significant development with short- and medium-term implications for both the global economy and Malaysia.
The peace agreement between the US and Iran, which led to the reopening, is a positive development for the global economy, as the Strait handles approximately one-fifth of global oil trade.
