Oil markets worldwide convulsed this week as the U.S.-Israel military campaign against Iran choked off key Gulf shipping lanes, prompting G7 leaders to signal readiness for drastic interventions like tapping strategic reserves.
Finance chiefs from the Group of Seven met online with International Energy Agency officials but stopped short of authorising any drawdown. Brent crude futures rocketed past $119 per barrel in early Asian trading on Monday—a 25% intraday surge—before cratering below $90 after U.S. President Trump’s optimistic CBS remarks hinting at an imminent ceasefire.
The Strait of Hormuz, which carries 20% of seaborne oil or around 21 million barrels daily before the conflict according to IEA data, has seen tanker traffic evaporate, stranding millions of barrels of crude and LNG as reported by Bloomberg.
U.S. and Israeli airstrikes pulverised Iranian oil terminals over the weekend, while Tehran launched drone barrages at Gulf neighbours; Saudi Arabia downed two salvos near its Ghawar field, the world’s largest.
IEA chief Fatih Birol warned that global markets “have deteriorated in recent days” and detailed, “In addition to the challenges of transit through the Strait of Hormuz, a substantial amount of oil production has been curtailed. This is creating significant and growing risks for the market. IEA member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation.”
French Finance Minister Roland Lescure cautioned “we are not there yet,” echoing the lack of action since 2022’s Ukraine-triggered releases. The G7 vowed that they stand ready to take necessary measures, including to support global supply of energy such as stockpile release.
Britain’s Chancellor Rachel Reeves demanded immediate de-escalation and safe shipping passages, adding “I stand ready to support a co-ordinated release of collective IEA oil reserves.”
Equities yo-yoed with S&P 500 up 0.8% and FTSE 100 off just 0.3% thanks to Shell and BP gains, though Asian indexes plunged. UK yields climbed, signalling rate hike risks amid inflation fears.
Trump posted, “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”