G7 to take ‘necessary measures’ to support energy supplies
G7 to take ‘necessary measures’ to support energy supplies
Following the recent conflict between the US, Israel, and Iran, G7 countries have vowed to take “essential steps” to stabilize the global energy market. However, the G7 finance ministers’ virtual gathering with the International Energy Agency (IEA) concluded without consensus on releasing emergency oil reserves. Despite the price of Brent crude nearing $120 a barrel due to fears of prolonged supply interruptions, it dropped sharply after President Trump expressed optimism that the war would soon conclude.
Market Volatility and Strategic Stockpiles
Fatih Birol, IEA chief, noted that oil markets have worsened recently, citing disruptions in the Strait of Hormuz and reduced production levels. He warned that these factors pose mounting risks to global energy stability. The IEA’s member states hold over 1.2 billion barrels of government-controlled emergency oil stocks, with an additional 600 million barrels managed by industry under state obligation.
“We are not there yet,” remarked French Finance Minister Roland Lescure, addressing whether emergency reserves would be tapped. This would mark the first such release since Russia’s invasion of Ukraine in 2022.
Global Implications and Price Projections
The G7 reaffirmed its readiness to deploy measures like stockpile releases to safeguard energy supplies. Chancellor Rachel Reeves highlighted the UK’s push for Middle East de-escalation and emphasized securing maritime routes. Analysts suggest that if the conflict persists, oil prices could climb to $120-$150 per barrel, triggering “demand destruction” as consumers reduce usage.
“The question everyone is asking themselves is, what is the duration of this conflict?” said Paul Gooden, a natural resources expert at NinetyOne Asset Management. He added that prolonged tensions could force prices into a range where demand starts to shrink.
Gas prices also saw a sharp increase, with UK month-ahead delivery costs rising nearly 25% to 171p per therm. Though prices have nearly doubled since the war began, they remain below the 640p peak from 2022. Meanwhile, US and London stock markets experienced mixed reactions, with the S&P 500 ending the day up 0.8% and the Dow Jones rising 0.5%.
Escalating Tensions and Regional Impact
The conflict has severely disrupted energy infrastructure, with US and Israeli airstrikes targeting Iranian oil facilities and Iranian strikes hitting Gulf states. Saudi Arabia’s defense forces intercepted drones aimed at a key oilfield, underscoring the region’s vulnerability. Over the weekend, markets grew anxious as energy infrastructure in both Iran and neighboring countries faced damage, causing a swift price reaction.
“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 USA, and World, Safety and Peace,” Trump declared on Truth Social. His comments followed a 25% surge in Brent crude on Monday, which later retreated to below $90.
