Why the historic release of global oil reserves may not be enough to curb prices

Following last week’s targeting of key energy facilities in the region — and Iran’s overt attacks on a major liquefied natural gas facility in Qatar, the largest in the world, as well as oil refineries in Saudi Arabia and Kuwait — oil prices continued to rise on Thursday. The strikes on energy infrastructure across the Middle East have heightened concerns over supply disruptions.

Brent crude futures surged by 10% during trading, reaching $119.13 per barrel before easing to $115.90. In the spot market, Brent rose by 7% to $115 during trading, before retreating to $110 per barrel.

Meanwhile, US benchmark West Texas Intermediate (WTI) crude climbed by 3% in futures trading to $95.94 per barrel, having briefly touched $100 during the session, compared to $95.29 in spot trading.

Amid this deliberate escalation, global energy markets are experiencing an unprecedented level of anxiety as the military confrontation in the Arabian Gulf escalates between Iran on one side and United States and Israel on the other. The region is not merely a geopolitical flashpoint; it represents the very heart of the global energy system, through which a substantial portion of the world’s oil and gas exports flows.

Amid this escalation, major industrial economies have moved swiftly to contain a potential shock to global markets. The International Energy Agency announced a plan to release approximately 400 million barrels of oil from strategic reserves into global markets — one of the largest coordinated stock releases since the agency was established. In parallel, the United States declared the release of about 170 million barrels from its Strategic Petroleum Reserve, aiming to calm markets and prevent crude prices from surging as a result of supply disruptions linked to the conflict.

Despite the significance of these measures, a central question continues to dominate global energy discussions: To what extent can these actions stabilise oil supplies and prices, particularly if the war continues and shipping through the Strait of Hormuz remains disrupted?

The strategic significance of the war in the Arabian Gulf stems from the region’s central role in global energy supply. Countries bordering the Gulf — including Saudi Arabia, United Arab Emirates, Kuwait, Iraq, Qatar, and Iran — rank among the world’s largest producers and exporters of oil and natural gas.

Most of these exports pass through the world’s most strategically sensitive maritime chokepoint: the Strait of Hormuz.

Estimates suggest that around 20 million barrels of oil per day pass through the strait — roughly one-fifth of global oil trade. The waterway is also a vital corridor for liquefied natural gas shipments, particularly from Qatar, one of the world’s largest LNG exporters.

For this reason, any disruption to navigation in the strait has immediate consequences not only for oil prices but also for the broader global energy system and the world economy.

The decision by the International Energy Agency to release 400 million barrels from strategic reserves was a direct response to fears of supply shortages stemming from the Gulf conflict.

This move serves several key objectives:

First: Reassuring global markets

Oil markets are highly sensitive to geopolitical developments and speculative pressures. Announcing the release of large volumes of oil sends a signal that industrialized nations possess sufficient reserves to manage temporary supply disruptions.

Second: Bridging short-term supply gaps

These reserves can provide several million barrels per day for a limited period, helping offset disruptions in Gulf exports.

Third: Containing speculative price surges

Periods of geopolitical uncertainty often trigger aggressive speculation in futures markets, driving prices higher. Strategic releases aim to dampen such speculative pressures.

However, many energy experts emphasise that releasing strategic reserves represents a temporary buffer rather than a structural solution. Strategic stockpiles are finite and cannot compensate for prolonged disruptions in physical oil flows from the Gulf.

The trajectory of oil prices remains closely tied to developments in the Strait of Hormuz. Even partial disruptions to maritime traffic could trigger significant shocks in energy markets.

Economic analyses point to several possible price scenarios depending on how the crisis evolves:

Scenario One: Limited disruption

If tensions persist without a full closure of the strait, oil prices may fluctuate between $100 and $120 per barrel.

Scenario Two: Prolonged partial disruption

Should shipping routes become unsafe or tanker traffic be severely restricted, prices could climb to $120–$150 per barrel.

Scenario Three: Complete closure of the strait

If military escalation leads to a full shutdown of maritime traffic, the world could face a major oil shock, potentially driving prices toward $200 per barrel.

This scenario reflects the possibility that nearly 20 million barrels per day could effectively be removed from global markets — an enormous supply gap that would be extremely difficult to replace quickly.

At first glance, it might seem that other producers — such as the United States, Brazil, or Norway — could compensate for disruptions in Gulf supplies. In reality, the situation is far more complex.

Most major oil-producing countries are already operating near their maximum production capacity, leaving little room for rapid output increases. Expanding production or developing new oil fields requires substantial investment and time.

Moreover, Gulf oil holds a significant logistical advantage due to its proximity to major Asian markets such as China and India. As a result, any disruption in Gulf supplies presents major logistical challenges for redirecting global oil flows.

The impact is not limited to crude oil alone. Global liquefied natural gas markets would also face disruptions, given the Gulf’s central role in LNG exports — particularly those from Qatar.

If the conflict in the Gulf persists or expands, global energy markets could face several severe consequences.

1. A historic oil shock

Oil prices could surge beyond $150 or even $200 per barrel, levels not seen since the energy crises of the 1970s.

2. Global inflationary pressure

Higher energy prices would increase transportation and manufacturing costs, pushing up prices for goods and services worldwide.

3. A slowdown in global economic growth

Sharp increases in energy costs historically lead to slower economic growth and raise the risk of recession in major economies.

4. A restructuring of the global energy landscape

Such a crisis could accelerate the transition toward renewable energy, nuclear power, and alternative transport routes designed to bypass vulnerable maritime chokepoints.

Ultimately, the current crisis highlights the vulnerability of the global energy system to geopolitical conflicts. While the release of strategic reserves may soften the immediate shock, the decisive factor remains the stability of the Gulf region and the uninterrupted flow of oil through the Strait of Hormuz.

Should the conflict persist or escalate further, the world could find itself facing the most severe energy crisis in half a century, once again demonstrating how oil can shift from being merely an economic commodity to a powerful geopolitical instrument shaping the trajectory of the global economy.

As markets watch developments unfold day by day, a pressing question remains: Can international efforts prevent the Gulf conflict from triggering a global energy crisis, or is the world already standing on the threshold of a historic oil shock?