The German has been the subject of criticism this season, but scored in Arsenal's 3-0 win away at Aston Villa while playing through the middle.
Murphy told BBC Sport: "[Ozil] came to Arsenal with one of the best assist records in Europe. The problem is, when he is wide, he expends so much energy he hasn't got the legs to go forward.
"What Ozil did against Villa, he ended up in the wide positions because he saw the space. When he starts wide, he gets isolated and trapped.
"He thrives on confidence. The flexibility and variation is crucial for Arsenal to be successful."
Ozil is Arsenal's record signing, costing the Gunners £42.5m when they bought him from Real Madrid in the summer of 2013.