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Energy prices rise as supply worries intensify; IEA considers strategic oil release
Energy prices have experienced a renewed upward impulse driven by escalating concerns over supply disruptions in the Middle East. Despite a higher-than-expected accumulation in US inventories and a landmark agreement by the International Energy Agency (IEA) to release 400 million barrels of crude, oil prices continued to appreciate as geopolitical risk premiums outweighed bearish fundamental data.
Energy markets rallied in tandem as the intensifying US-Israel-Iran conflict heightened fears of severe disruptions to regional supply chains.
The IEA has committed to releasing 400 million barrels of oil to stabilise global demand; however, analysts suggest this volume may be insufficient to offset current geopolitical tensions.
US inflation rates remained unchanged in February, aligning with market consensus despite the volatility in the energy sector.
Escalation in the US-Israel-Iran conflict pressures oil and natural gas prices upwards
Energy prices rose sharply across the board amidst deepening concerns regarding the US-Israel-Iran conflict, which is causing significant logistical disruptions throughout the Middle East. During the latest trading session, the Brent futures contract (BRNK6) surged 4.76% to $91.98, while the WTI futures contract (CLJ6) increased 4.59% to $87.31 per barrel. Similarly, the natural gas contract (NGJ6) rose by 5.76% to $3.19, and gasoline futures (RBJ6) appreciated by 5.80% to $2.79 per unit.
While previous comments from US President Donald Trump suggesting an imminent end to the hostilities had briefly dampened prices, continued military engagements and bilateral tensions have reversed that sentiment. According to Reuters, Iranian officials have warned that the global market should prepare for oil prices reaching $200 per barrel. Conversely, President Trump has asserted that the conflict will conclude at his discretion—a stance sharply contradicted by Iranian spokespersons who maintain they will dictate the timeline. This volatile rhetorical, coupled with ongoing kinetic strikes, has provided a renewed bullish catalyst for energy markets.
A primary driver of this upward pressure is the closure of the Strait of Hormuz—a critical maritime chokepoint through which approximately 20% of global oil and natural gas supply passes. Ongoing attacks on shipping vessels have intensified fears of a prolonged supply vacuum. Although President Trump indicated that the US was prepared to escort tankers through the Strait if necessary, there is currently no official confirmation that such military support has been deployed.
US inventories rise, while the IEA authorises historic release from strategic reserves
Data released by the US Energy Information Administration (EIA) revealed that crude oil stocks increased by 3.824 million barrels during the latest weekly assessment period, significantly exceeding analyst estimates of 1.1 million barrels. This marks the third consecutive week of inventory builds surpassing forecasts, suggesting a potential over-accumulation of domestic stocks. Paradoxically, the WTI oil benchmark remained resilient, rising by more than 5% during the session as geopolitical risk took precedence over storage data.
In a significant policy move reported by Reuters, the International Energy Agency (IEA) has agreed to release 400 million barrels of oil from strategic reserves to curb further price spikes. This intervention is the largest in the agency's history, reflecting the severity of the current supply disruption. Nonetheless, oil prices continued to appreciate following the announcement. Analysts suggest that the release may have been "priced in" by traders or is perceived as insufficient to counter a total supply halt. For market participants, the definitive resolution of the conflict remains the most critical factor in assessing the long-term impact on energy infrastructure and global supply chains.
US inflation rates remain unchanged, matching analyst expectations
According to the US Bureau of Labour Statistics, the headline inflation rate held steady at 2.4% in February, meeting consensus forecasts. Similarly, core inflation—which excludes volatile food and energy costs—remained unchanged at 2.4%.
While these indicators have yet to fully reflect the recent surge in energy costs, market participants remain concerned about the potential "pass-through" effects if the Middle Eastern conflict persists. US diplomats have expressed optimism that the war is nearing a conclusion, but Iranian officials have countered that they are prepared to sustain the conflict for several months if necessary.
Figure 1. US Inflation Rate (2016-2026). Source: Data from the US Bureau of Labour Statistics; Figure obtained from Trading Economics.
