Oil jumps back over $100 per barrel with tankers ablaze after being struck near the Strait of Hormuz
Plans to release strategic reserves have offered some relief, but the IEA warns the conflict is causing the largest oil supply disruption ever.
After a brief bout of relief earlier this week, markets remain under duress on Thursday morning after a flurry of attacks on ships sailing through or near the Strait of Hormuz, where nearly a fifth of global oil supply flows daily, pushing oil prices briefly above $100 at one point and sending stock futures lower. Per CNN, six ships have now been reported as being struck in total over the last two days.
As of 5:42 a.m. ET, global benchmark Brent crude traded 5.7% higher at $97.20 per barrel, after briefly topping $100 following an attack on two tankers in Iraqi waters, with videos of tankers ablaze circulating widely on social media.
Equity markets were also broadly in the red as investors weighed the escalating disruption to the world's most important commodity: Japan’s Nikkei 225 fell 1.04% alongside declines across the Asia-Pacific markets, while S&P 500 futures were 0.4% lower as of 6:30 a.m. ET.
The renewed spike in oil prices is coming despite attempts from world powers to mitigate the supply crunch. Member countries of the International Energy Agency (IEA) agreed to release 400 million barrels of oil from their reserves on Wednesday, which will be led by 172 million barrels from the US’ Strategic Petroleum Reserve, roughly 40% of its total holdings.
If the disruption continues, however, these releases will likely only be a temporary solution, with the IEA calling the Iran war the "largest supply disruption in history" for global oil markets.
Per the IEA's new report out today:
With crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mb/d. In the absence of a rapid resumption of shipping flows, supply losses are set to increase.
And, in regards to the release of reserves:
The co-ordinated emergency stock release provides a significant and welcome buffer, but in the absence of a swift resolution to the conflict, it remains a stop-gap measure.
The last time the US tapped the reserve was under President Biden, in a bid to keep a lid on inflation more broadly.
In a comment addressed at Washington, Iran’s military command spokesperson warned Wednesday to “get ready for oil to be $200 a barrel, because the oil price depends on regional security, which you have destabilized,” according to Reuters.
