G7 readies strategic reserves after oil nears $120 amid Iran war

The Group of Seven major world economies is ready to release strategic oil reserves to stabilize the global market if needed, after crude prices surged to nearly $120 a barrel early Monday amid the US-Israel-Iran war.

What happened: Speaking to reporters in Brussels after an online meeting of the G7 finance ministers on Monday about the war between Iran, Israel and the United States, French Finance Minister Roland Lescure said: “We are prepared to take all necessary measures, including drawing on strategic stock reserves, in order to stabilize the market."

Oil reserves that are held by members of the International Energy Agency can be deployed as an emergency response to sudden supply disruptions globally.

Lescure said the G7 nations had not yet decided whether to release the emergency reserves.

Oil prices surged to nearly $120 per barrel early Monday before stabilizing slightly as the expanding Iran war disrupted shipping through the Strait of Hormuz and threatened global energy supplies in the crude-rich region.

Global benchmark Brent crude surged to $119.25 a barrel around 2 a.m. GMT (10 p.m. ET Sunday), while US West Texas Intermediate surged to a peak of $119.10. 

At 2:42 a.m. ET, Brent crude futures were up $15.51, or 16.7%, to $108.20 per barrel, the largest single jump on record, while WTI crude futures rose 15.7% to $105.13.

Prices later pared gains, with Brent easing to around $102.04 a barrel at 11 a.m. ET, while WTI traded at $100.81.

The rally followed a sharp rise last week, when Brent climbed 27% and WTI surged 35.6%.

In a post on the Truth Social platform Sunday, US President Donald Trump shrugged off the price rises, claiming they are a "very small price to pay" for global "peace and safety."

Why it matters: It is the first time oil prices have passed $100 since July 2022 as the key producers in the energy-rich Middle East region curb output amid the conflict. The record surge in global oil prices comes amid ongoing disruptions to energy supplies through the Strait of Hormuz, a major shipping route. The waterway, which flows between Iran and the United Arab Emirates, is one of the world’s most important chokepoints, carrying roughly a fifth of all global oil and liquefied natural gas.

In response to the US and Israeli strikes that began Feb. 28, Iran has been attacking the Jewish state, US bases in the region, as well as its Arab Gulf neighbors, including the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman. Iran has also been targeting major Gulf cities and their main energy assets. The Al Ma’ameer oil facility in Bahrain was struck by an Iranian missile Monday, causing a fire and material damage. Shortly after, the kingdom’s state-owned Bapco Energies declared force majeure — a legal step that allows a company to suspend contractual obligations under extraordinary circumstances — on its operations.

The announcement follows a similar move last week by Kuwait Petroleum Corporation and QatarEnergy — the world’s biggest LNG-producing company.

Countries such as the UAE and Saudi Arabia have options to ship their crude through pipelines that bypass the Strait of Hormuz. Kuwait, Qatar and Bahrain, however, have no alternative and rely entirely on the waterway to ship their hydrocarbons. Iraq can export crude via its semi-autonomous Kurdistan Region to the Ceyhan Port in Turkey, but Baghdad has suspended shipments along that route as a precautionary measure, Bloomberg reported March 3, citing sources familiar with the discussions.

As of Monday, at least 10 vessels in or near the strait had come under fire since Iran blocked the waterway in retaliation for US-Israeli strikes, Agence France-Presse reported, citing data analysis groups. Maritime traffic through the Strait of Hormuz has largely halted since the conflict began. Now in its 10th day, the war shows no sign of easing, prolonging investor uncertainty and adding to inflationary pressures.

Know more: Gas prices have also shot up since Feb. 28. QatarEnergy’s moratoriums on production and export of LNG last week had a huge impact on global gas markets. The state-owned company has an annual production capacity of 77 million metric tons and plans to expand it to 142 million by 2030.

Europe, which imported around 9.2 million metric tons of LNG from Qatar last year, according to data firm Kpler, is particularly vulnerable as it emerges out of winter with depleted gas storage tanks. The continent is likely to face competition for more expensive replacement supplies with Asian buyers. On Monday morning, European gas futures jumped as much as 30% compared to Friday's close as the war in the Middle East rumbled on.