G7 to take ‘necessary measures’ to support energy supplies
G7 to take ‘necessary measures’ to support energy supplies
The G7 alliance has declared its willingness to implement “necessary measures” to stabilize global energy markets following the escalation of hostilities between the US and Iran, with Israel involved. Despite these commitments, a gathering of G7 finance ministers and the International Energy Agency (IEA) concluded without consensus on releasing strategic oil reserves. Oil prices spiked to near $120 per barrel earlier in the week, driven by fears of prolonged supply disruptions, but retreated significantly after President Trump expressed optimism that the conflict would conclude soon.
During the virtual meeting, the possibility of tapping into stockpiles was among several proposals considered. Fatih Birol, head of the IEA, highlighted the recent decline in global oil markets, noting challenges such as reduced production and the threat to transit through the Strait of Hormuz. He stated,
“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 nations currently maintain over 1.2 billion barrels of public emergency oil reserves, with an additional 600 million barrels held by industry under government mandate. French Finance Minister Roland Lescure indicated that emergency stock releases are not imminent, remarking,
“we are not there yet.”
Such a move would mark the first time since Russia’s invasion of Ukraine in 2022 that reserves are tapped for this purpose.
Chancellor Rachel Reeves emphasized the UK’s push for immediate calm in the Middle East during the meeting, pledging security for regional shipping routes. She added,
“I stand ready to support a co-ordinated release of collective IEA oil reserves.”
The disruption in energy supplies from the region risks increasing costs for global consumers and businesses, potentially affecting inflation trends and central bank decisions.
Strait of Hormuz and Regional Escalations
About a fifth of the world’s oil supply typically transits through the narrow Strait of Hormuz, but traffic has nearly stopped since the war began over a week ago. The US and Israel launched fresh airstrikes against Iranian targets, including oil facilities, while Iran retaliated by targeting Gulf energy infrastructure. Saudi Arabia reported intercepting and destroying two drone waves aimed at a key oilfield.
Market confidence wavered after weekend tensions, with visible damage to energy systems in both Iran and neighboring Gulf states. This led to a rapid rise in gas prices, with UK month-ahead delivery rates surging to 171p per therm on Monday morning. Prices later eased to around 149p per therm, though they remain nearly double the pre-war levels, still below the 640p peak from 2022.
Market Volatility and Economic Impact
Overnight, Brent crude prices briefly hit $119.50 per barrel before dropping below $90 after Trump claimed the war was “very complete, pretty much” on CBS. The US president has consistently downplayed concerns over rising oil prices, stating on Truth Social:
“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!”
Paul Gooden, natural resources expert at NinetyOne Asset Management, noted that the duration of the conflict remains a critical uncertainty. “The longer it goes on, the more nervous the oil markets are going to be,” he said, suggesting prices could reach $120-$150 per barrel before demand starts to decline. He added that temporary price spikes are likely but not sustainable without a resolution.
Meanwhile, US stock markets opened lower, with the S&P 500 falling 0.2% and the Dow Jones losing 0.5% by midday. London’s FTSE 100 index recovered slightly, ending the day with a minor decline of 0.3%.
