Crude markets posted one of their wildest sessions on record, with intraday prices briefly touching $115 per barrel before reversing on reports of an emergency G7 finance ministers’ meeting and a potential International Energy Agency (IEA) release of emergency reserves. By the Asian open, prices were hovering around $90, below Friday’s close, as traders reacted to signals from Washington and the prospect of coordinated action.
The initial surge reflected curtailed supply from the Gulf, where producers are slowing output and several have declared force majeure, a contractual clause that removes liability when extraordinary events prevent delivery. The concentration of flows through the Strait of Hormuz has kept physical risk premia elevated.
A 300 million‑barrel draw would be more than double the record intervention after Russia’s invasion of Ukraine in April 2022. These reserves have been tapped only five times. Even so, 300 million barrels equates to less than three days of global consumption at roughly 104 million barrels per day, and about two weeks of typical Hormuz throughput-significant relief, but time‑limited.
IEA collective actions are approved by its Governing Board and draw on stocks that members are obliged to hold at not less than 90 days of net imports. Volumes are allocated across countries and can come from public reserves such as the US Strategic Petroleum Reserve as well as obligated industry stocks. Barrels reach the market over days and weeks, but clear signalling often cools futures prices ahead of physical deliveries.
G7 finance ministers did not authorise an immediate release, indicating that additional measures are required to stabilise logistics as well as price. Any subsequent decision will need to consider domestic fuel markets, storage and shipping capacity, and the pace at which stocks can be rebuilt.
Attention has therefore turned to maritime security. Naval escorts through the Strait of Hormuz can deter attacks, yet they do not eliminate the risk from drones and missiles. Insurers require more than patrols; they need defined rules of engagement, convoy schedules and clarity on liabilities before reinstating cover at sustainable rates.
War‑risk insurance is a practical constraint. Governments are examining options such as temporary state guarantees, reinsurance backstops or expanded national war‑risk programmes to bring premiums down. Without such support, hull and cargo cover can become prohibitively expensive, forcing shipowners to reroute or stand off.
Sanctions policy is also under review. The United States has floated targeted waivers that could allow additional Russian barrels to flow under controlled conditions despite Ukraine‑related measures. Any such licences would need to align with the G7 price cap and provide traders, shippers and banks with unambiguous compliance parameters.
Market balances extend beyond crude. With China, India and South Korea the principal buyers of Gulf supply, US LNG cargoes previously bound for Europe are reportedly turning towards the Panama Canal to serve Asian demand. Tight availability of jet fuel and petrochemical feedstocks from the Gulf raises risks for aviation scheduling and fertiliser output.
Following the G7 discussions, the UK Chancellor told the House of Commons that the most effective support for consumers is a de‑escalation of military tensions. Even in a rapid ceasefire scenario, repairs to infrastructure and the re‑routing of cargoes would take weeks, implying a lag between headlines and pump prices.
Domestic politics in the United States remains a binding constraint. Comments by President Donald Trump signalling a reduced appetite for a prolonged conflict helped pull prices lower intraday, reflecting the sensitivity of US gasoline costs for his voter base. Markets will track whether rhetoric is matched by operational guidance.
For now, hostilities continue, immediate panic has eased, and policy choices are narrowing towards a mix of stock releases, maritime security measures and calibrated sanctions relief. Energy and logistics teams should assume elevated freight and insurance costs, intermittent delays through Hormuz and further bouts of price volatility.