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CALGARY — The International Energy Agency says the conflict involving Iran has produced what could be the largest supply disruption in the history of the global oil market, sending crude prices above US$100 per barrel despite a record release of emergency reserves.
Benchmark Brent crude briefly rose above US$101 per barrel Thursday, while U.S. benchmark West Texas Intermediate traded near US$95. Prices have climbed sharply since hostilities began nearly two weeks ago following U.S. and Israeli strikes on Iran and retaliatory attacks across the Persian Gulf.
Energy markets have been particularly rattled by developments around the Strait of Hormuz, the narrow waterway between Iran and the Arabian Peninsula through which roughly one-fifth of the world’s oil supply normally passes.
Missile and drone strikes targeting ships and energy infrastructure across the Gulf have sharply reduced tanker traffic through the corridor. Attacks on vessels in Iraqi waters and threats against shipping in the region have further heightened fears of prolonged disruptions to global energy flows.
In its latest oil market report, the Paris-based IEA estimated global crude production has fallen by about eight million barrels per day since the conflict escalated, with additional disruptions affecting petroleum products such as diesel and refined fuels.
The sudden drop in supply has sent shockwaves through global markets.
In an attempt to stabilize prices, the IEA’s 32 member countries agreed this week to release 400 million barrels of crude from strategic reserves — the largest coordinated stockpile release in the agency’s history and more than double the amount released after Russia’s invasion of Ukraine in 2022.
But analysts say the move has done little to calm markets.
Strategic reserves can cushion short-term shocks, but traders warn the released oil would cover only about 20 days of lost supply if disruptions to Middle East shipping persist.
“As long as the Strait of Hormuz remains under threat, markets will continue to price in significant geopolitical risk,” said one energy market analyst.
The surge in oil prices is also rippling across global financial markets.
Stock indexes across Asia, Europe and North America moved lower Thursday as investors weighed the economic impact of higher energy costs. Airline and transportation companies were among the hardest hit sectors because fuel is a major operating expense.
Several airlines have already begun adjusting routes or adding fuel surcharges as jet fuel costs climb.
Higher oil prices can also quickly feed into broader inflation.
Crude oil is a key input for gasoline, diesel, aviation fuel and petrochemicals used in everything from plastics to fertilizers. When oil prices rise sharply, transportation and manufacturing costs often follow.
Economists say sustained prices above US$100 per barrel could complicate central banks’ efforts to bring inflation under control.
Many policymakers had been signalling possible interest-rate cuts later this year after inflation began to ease. A prolonged spike in energy prices could reverse that trend by pushing up the cost of goods and services across the economy.
For consumers, the most immediate impact often appears at the gas pump.
Because crude oil accounts for a significant share of gasoline prices, sustained increases in global oil markets typically translate into higher fuel costs within weeks.
Governments in several countries are already examining contingency measures to stabilize domestic energy supplies if the conflict continues to disrupt global flows.
Analysts say markets remain highly sensitive to developments in the Gulf region.
If tanker traffic through the Strait of Hormuz resumes normally, prices could retreat quickly as reserve supplies enter the market. But if attacks on shipping and energy infrastructure continue, oil markets could face a prolonged period of volatility.
For now, traders say the key question remains whether the world’s most important oil shipping route can be reopened safely.
“As long as Hormuz is unstable,” one analyst said, “oil markets will remain on edge.”
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