Global oil markets turned volatile again on Wednesday as crude prices slipped amid reports that the International Energy Agency (IEA) is considering the largest emergency oil stockpile release in its history to cushion potential supply disruptions triggered by the escalating conflict involving the United States, Israel and Iran.
The development reflects growing concern among policymakers and energy market participants that the war in the Middle East could significantly disrupt global oil flows, particularly through the strategically vital Strait of Hormuz, through which one-fifth of the world’s oil supply normally passes.
Benchmark crude futures moved lower in early trading as markets digested the possibility of coordinated stockpile releases by major consuming nations. Brent crude futures fell 88 cents, or about 1 per cent, to $86.92 per barrel, while West Texas Intermediate (WTI), the U.S. benchmark, slipped 35 cents, or 0.4 per cent, to $83.10 per barrel.
The decline followed price swings earlier in the week. U.S. crude prices jumped nearly 5 per cent at the market open on Wednesday after both Brent and WTI had plunged more than 11 per cent on Tuesday, the steepest single-day percentage drop since 2022, a day after Donald Trump predicted a quick end to the conflict.
The volatility came just days after WTI rose above $119 per barrel on Monday, its highest level since June 2022, as traders reacted to escalating geopolitical risks in the Gulf region.
Reports that the IEA may coordinate a large-scale release of emergency oil reserves among its member countries have become a key factor shaping market sentiment.
According to a report by The Wall Street Journal, the agency is weighing a drawdown larger than the 182 million barrels of crude released by member nations in 2022 following Russia’s invasion of Ukraine.
If implemented, the new release would represent the largest coordinated emergency stockpile intervention in the IEA’s history.
Analysts at Goldman Sachs estimate that such a drawdown could offset approximately 12 days of the potential disruption to Gulf oil exports, which the bank currently estimates at about 15.4 million barrels per day.
The proposed action reflects growing fears that hostilities in the Middle East could disrupt shipping lanes or damage production and refining infrastructure across the region.
Energy markets remain highly sensitive to developments in the intensifying conflict, which has already triggered significant military activity across the Gulf.
On Tuesday, the United States and Israel carried out some of the most intense airstrikes of the war against Iranian targets, according to statements from the Pentagon and reports from observers on the ground.
The U.S. Central Command also confirmed that American forces destroyed 16 Iranian vessels suspected of laying naval mines near the Strait of Hormuz.
The move came as President Trump warned that any mines deployed by Iran in the strategic waterway must be removed immediately.
Trump has repeatedly said the United States is prepared to escort oil tankers through the Strait of Hormuz if necessary to ensure the continued flow of global energy supplies. However, sources told Reuters that the United States Navy has so far declined requests from shipping companies for military escorts, citing the heightened security risks in the region.
The conflict has also begun to affect key energy infrastructure in the Gulf.
Abu Dhabi National Oil Company (ADNOC) shut down its Ruwais refinery after a drone strike triggered a fire within the facility complex, according to a source familiar with the development. The refinery closure represents the latest disruption to energy assets linked to the escalating war.
Meanwhile, Saudi Arabia, the world’s largest oil exporter, is attempting to increase shipments through alternative routes to mitigate supply disruptions from the Gulf.
Shipping data indicate that the kingdom is boosting exports through the Red Sea port of Yanbu to maintain global supply flows and reduce the risk of sharp production cuts.
However, analysts note that shipments via the Red Sea remain far below the levels required to fully compensate for reduced oil flows through the Strait of Hormuz.
Regional producers including Iraq, Kuwait and the United Arab Emirates have already scaled back output as security concerns disrupt operations.
Energy consultancy Wood Mackenzie estimates that the ongoing conflict is currently cutting Gulf oil and refined product supply by roughly 15 million barrels per day, a substantial portion of global output.
If disruptions persist, analysts warn that crude prices could surge significantly higher.
Wood Mackenzie estimates that sustained supply interruptions could push oil prices to as much as $150 per barrel, a level not seen since the commodity boom of the late 2000s.
Investment bank Morgan Stanley also cautioned that even a swift diplomatic resolution may not immediately stabilise energy markets.
“Even a quick resolution probably implies weeks of disruption for energy markets yet,” the bank said in a note to clients.
As the crisis unfolds, policymakers are considering coordinated actions to stabilise energy markets and prevent a sharp spike in fuel prices.
Officials from the Group of Seven (G7) have convened online discussions to evaluate the potential release of emergency oil reserves.
Later on Wednesday, Emmanuel Macron, president of France, is scheduled to host a virtual meeting of G7 leaders to assess the impact of the Middle East conflict on global energy supplies and discuss possible measures to ease market pressures.
However, some market analysts remain sceptical about the immediate effectiveness of any reserve release.
Philip Jones-Lux, senior analyst at Sparta Commodities, noted that while emergency stockpiles could help stabilise markets temporarily, the speed at which those reserves can be deployed may limit their impact.
“No release has yet been formally announced, and there are doubts around the ultimate pace of any drawdowns from those reserves,” he said.
