G7 to take ‘necessary measures’ to support energy supplies
G7 to take ‘necessary measures’ to support energy supplies
Following the US-Israel conflict with Iran, G7 countries have declared their preparedness to implement “necessary measures” to stabilize global energy markets. However, the latest gathering of G7 finance ministers and the International Energy Agency (IEA) concluded without a unified decision to tap strategic crude reserves. Oil prices spiked to nearly $120 per barrel on Monday, driven by fears of prolonged supply disruptions, before declining sharply after President Trump signaled optimism that the conflict would soon conclude.
Market Volatility and Strategic Stockpiles
Fatih Birol, IEA director, highlighted that global oil markets had “deteriorated in recent days” during the virtual meeting. He noted challenges from the Strait of Hormuz and reduced production levels, warning of mounting risks. IEA members currently control over 1.2 billion barrels of public emergency oil reserves, with an additional 600 million barrels held under government mandate.
“In addition to transit issues through the Strait of Hormuz, a significant portion of oil output has been cut back. This is creating substantial and increasing market risks,” Birol stated.
French Finance Minister Roland Lescure remarked that “we are not there yet” regarding the release of emergency reserves, marking the first such action since Russia’s invasion of Ukraine in 2022. The G7 reiterated its readiness to act, including releasing collective IEA stockpiles, in a post-meeting statement.
UK Chancellor Rachel Reeves emphasized the need for “immediate de-escalation” in the Middle East during the meeting, also pledging to ensure the safety of vessels in the region. “I am prepared to support a coordinated release of IEA reserves,” she added.
Strategic Impact and Market Reactions
Energy supply disruptions from the region pose a threat to global price stability, potentially inflating costs for consumers and businesses. Rising inflation could limit central banks’ ability to cut interest rates. The Strait of Hormuz, a critical chokepoint for about 20% of the world’s oil, has seen near-complete shutdowns of traffic since the conflict began over a week ago.
Over the weekend, the US and Israel intensified airstrikes targeting Iranian oil facilities, while Iran retaliated by striking energy infrastructure in neighboring Gulf nations. Saudi Arabia reportedly intercepted and neutralized two drone attacks on a key oilfield. These developments triggered swift market panic, reversing earlier calm about the potential for a large-scale energy crisis.
On Monday, Brent crude prices surged over 25%, peaking at $119.50 per barrel before retreating below $90 after Trump asserted the “war is very complete, pretty much.” The president had previously downplayed concerns over oil prices, claiming they were a “small price to pay for safety and peace” in a post on Truth Social.
Gas prices also experienced a sharp increase, with UK month-ahead delivery rates rising nearly 25% to 171p per therm. However, they later stabilized at around 149p per therm. Despite doubling since the Iran conflict began, gas prices remain below the 640p peak seen in 2022. Meanwhile, US stock markets opened lower but rebounded, with the S&P 500 closing 0.8% higher and the Dow Jones Industrial Average rising 0.5%.
Paul Gooden, head of natural resources at NinetyOne Asset Management, noted the uncertainty surrounding the conflict’s duration. “The longer it continues, the more anxious the oil markets will become,” he said. He predicted prices might reach $120-$150 per barrel, where “demand destruction” could occur, prompting consumers to reduce oil usage.
