Brent futures rose sharply on Thursday, spiking above $100 before easing slightly but remaining higher than levels seen earlier in the week as markets stay incredibly volatile.
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This comes despite an unprecedented decision by the 32-member International Energy Agency (IEA) on Wednesday to release a record 400 million barrels to calm markets, more than double the volume released after Russia’s 2022 invasion of Ukraine.
Following the IEA decision, Iran stepped up its offensive campaign and launched strikes on Omani oil storage facilities at the Salalah port and multiple ships in and near the Strait of Hormuz, sending prices higher again.
Record coordinated release of reserves
The US alone is contributing 172 million barrels. Germany, France and Italy also confirmed they would tap their stocks, while Japan said it would begin releases next Monday.
IEA executive director Fatih Birol described the current Iran-related crisis as an “oil market challenge unprecedented in scale”, adding that the collective response reflected “strong solidarity” in defence of global energy security.
Exports of crude and refined products from the region have dropped to 10-15% of pre-war levels, with the Strait of Hormuz, which normally carries one-fifth of the world’s oil, effectively closed to the large majority of tankers.
Iran’s attacks blunt expected price relief
The new Iranian strikes came at lightning speed, directly after the IEA announcement.
Drones targeted fuel storage tanks and silos at Oman’s Salalah port, igniting fires that Omani authorities were still working to contain late on Wednesday.
British maritime security firm Ambrey confirmed damage to the facilities, while Danish shipping giant Maersk temporarily halted port operations.
Omani officials stressed there had been “no disruption to the continuity of oil supplies or petroleum derivatives” inside the country itself, while Iranian state media reported that President Pezeshkian had assured Oman’s sultan the incident would be investigated.
At the same time, six vessels were struck in the Gulf and Strait of Hormuz.
Among the reports, there was confirmation of a projectile hitting a container ship near the UAE and strikes on two tankers in Iraqi waters.
UK Maritime Trade Operations, and other monitoring groups, attributed the incidents to Iranian forces or proxies.
These developments, occurring the very day of the reserves release, appear to have smothered the anticipated calming effect on prices.
As of Thursday, the number of ships struck in the region since the beginning of the conflict rose to at least sixteen.
Record release may signal deeper market concerns
Some analysts note that the sheer volume of the release could itself be interpreted negatively. Previous coordinated actions never exceeded 183 million barrels.
The scale of the release suggests importing nations already view the disruption as the most severe and long-lasting in decades.
Even worse, a record release may not be enough.
Speaking to Euronews, Warren Patterson, Head of Commodities Strategy at ING, was blunt in his assessment.
“A record 400 million barrel release from emergency reserves is helpful, but it’s not going to go very far to offset the roughly 15 million daily supply currently disrupted.”
Patterson also added that “the only solution that will bring oil prices down on a sustained basis is getting oil flowing through the Strait of Hormuz again.”
Oxford Economics echoes this concern, warning that “the economic effect of higher energy costs rises as the oil price increases,” in a report that seemingly indicates the crisis is far from over and we have yet to feel the compounding effect of the initial shock.
Russian sanctions relief remains off the table
With the reserve release failing to calm prices, attention has turned to Russian oil as a potential source of additional supply.
The US Treasury last week granted Indian refiners a 30-day waiver to purchase Russian crude from vessels already stranded at sea, though the measure expires on 4 April and deliberately excludes new shipments.
Following the G7 emergency discussions on Wednesday, French President Emmanuel Macron stated that the group had agreed “the situation does not justify lifting any sanctions” on Russia, emphasising the need to increase global production instead.
The contrast between Washington’s narrow waiver and the G7’s firm collective position leaves little prospect of sanctions relief acting as a meaningful pressure valve, a view shared by analysts.
“Any sanction relief for Russia would see some marginal supply increases, but again not enough, with Russia’s oil output having held up well in recent years despite sanctions,” Warren Patterson of ING told Euronews.
$140-$150 oil barrel possible if conflict is prolonged
Should tensions persist, analysts warn prices could climb substantially higher.
Oxford Economics identifies $140 per barrel as the threshold at which the global economy tips into mild recession, reducing world GDP by 0.7% by year-end and pushing the UK, the Eurozone and Japan into contraction.
The managing director of the IMF, Kristalina Georgieva, also stated that every 10% increase in oil prices, provided they persist for most of the year, will push up global inflation by 0.4% and reduce worldwide economic output by as much as 0.2%.
“The risk is stark,” Patterson warned. “It’s only a matter of time before we see oil prices hitting fresh record highs if the conflict is not swiftly and decisively resolved.”
The IEA’s intervention has provided a temporary buffer, but with little visible impact on prices.