Failed US-Iran Talks Could Trigger Sharp Oil Price Surge, Economist Warns

KUALA LUMPUR, May 2026 — Global crude oil prices could rise sharply if negotiations between the United States and Iran fail to produce an agreement, raising concerns over possible disruption to international energy supplies.

Economist Prof. Emeritus Dr. Barjoyai Bardai from the Malaysia University of Science and Technology warned that oil prices could potentially increase by between 30% and 60% if talks between Washington and Tehran collapse. He said the oil market remains highly sensitive to geopolitical developments, especially those involving major global energy routes.

The warning comes at a time when uncertainty in the Middle East continues to influence energy market sentiment. Any escalation involving Iran could have a major impact on crude supply, shipping security and investor confidence, particularly if it affects the Strait of Hormuz.

The Strait of Hormuz is widely regarded as one of the most strategic maritime routes in the world. According to the US Energy Information Administration, oil flows through the strait averaged 20 million barrels per day in 2024, equivalent to about 20% of global petroleum liquids consumption.

Because of its importance to global energy trade, any disruption in the area could quickly affect crude oil prices, transportation costs and fuel markets. A prolonged supply disruption could also increase inflationary pressure in many countries, especially those that rely heavily on imported energy.

Economists often view oil prices as a major driver of global inflation because fuel costs affect transportation, manufacturing, logistics and consumer goods. If crude prices rise significantly, the impact could spread beyond the energy sector and raise operating costs for businesses.

For Malaysia, higher global oil prices could create mixed effects. As an oil-producing country, Malaysia may benefit from stronger energy revenue through petroleum-related income. However, higher fuel and logistics costs could also place pressure on consumers and businesses, especially if global inflation rises again.

The risk is not limited to oil prices alone. A breakdown in US-Iran negotiations could also weaken financial market confidence and push investors toward safe-haven assets. In previous periods of Middle East tension, global markets have often reacted quickly to concerns over supply security and geopolitical instability.

Recent developments around the Strait of Hormuz have already kept energy markets on alert. Reuters reported that tensions remained high after fresh US actions targeting Iranian military-linked threats near the area, while discussions over reopening or stabilising commercial shipping through the strait continued to face uncertainty.

The situation highlights how closely global oil prices are tied to diplomacy and security in the Middle East. Even without an immediate supply cut, uncertainty alone can trigger price movements as traders anticipate possible risks to future supply.

If talks between the United States and Iran succeed, it could help reduce pressure on global oil markets and restore confidence in energy supply routes. However, failure to reach an agreement may increase the risk of higher crude prices, especially if tensions lead to restrictions or disruptions in maritime trade.

Analysts say the next phase of negotiations will be closely watched by energy markets, governments and businesses worldwide. A positive diplomatic outcome could help stabilise prices, while further escalation may push crude oil higher and create wider economic consequences.

For now, the global oil market remains vulnerable to geopolitical signals, with investors monitoring every development involving Iran, the United States and the Strait of Hormuz.