Oil Spikes as War Hits Day Six

The Strait of Hormuz is a critical chokepoint for global energy, with roughly 20% of the world's daily oil consumption passing through the narrow waterway. The majority of these exports, nearly 90%, are destined for Asian markets, with China, India, Japan, and South Korea being the largest importers. The U.S. Strategic Petroleum Reserve (SPR), the world's largest emergency supply, was established in 1975 after the Arab oil embargo to counter severe supply disruptions. It has a total authorized storage capacity of 714 million barrels stored in underground salt caverns along the Texas and Louisiana coasts. Presidents have authorized emergency sales from the SPR on only a few occasions, including during Operation Desert Storm in 1991 and in response to supply disruptions in Libya in 2011. The largest-ever release was authorized by President Biden in 2022, when 180 million barrels were released over six months to counter market turmoil from Russia's invasion of Ukraine. Historic Middle East conflicts have consistently triggered oil price shocks. The 1979 Iranian Revolution, for example, cut 7% of world production at the time and caused prices to more than double between April 1979 and April 1980. Similarly, the 1990 Iraqi invasion of Kuwait also led to a significant, though more brief, price surge. Beyond tapping reserves, the Treasury Department is reportedly considering direct intervention in the oil futures market. This would be a highly unconventional policy, moving beyond influencing physical supply to using financial markets to try and curb soaring prices. This option may be on the table due to Treasury Secretary Scott Bessent's extensive background as a former hedge fund manager who traded commodities.