G7 Weighs Releasing Oil Reserves as Iran War Spikes Prices

The G7, an informal grouping of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, alongside the European Union, was originally formed as the G6 in 1975 to address the 1973 energy crisis. Coordinated releases of strategic petroleum reserves (SPR) are a primary tool for these nations to counter major oil supply disruptions. The International Energy Agency (IEA), established in 1974, coordinates these releases. There have been five such collective actions since the IEA's creation, including in response to the Gulf War in 1991 and the Russian invasion of Ukraine in 2022. The current conflict's primary impact is the disruption of passage through the Strait of Hormuz, a critical chokepoint for global energy supplies. In 2022, about 21% of the world's petroleum liquids consumption, or 21 million barrels per day, transited the strait. For context, nearly 34% of global seaborne crude oil trade passed through the Strait of Hormuz in 2025, with the majority destined for Asia. This is not the first time a conflict in the Middle East has led to a dramatic spike in oil prices. The 1973 oil crisis saw prices quadruple due to an embargo by Arab oil producers. The Iranian Revolution in 1979 and the Iraq-Kuwait War in 1990 also caused significant price shocks. More recently, prices surged to a record high of approximately $147 per barrel in July 2008 due to high demand and supply concerns, before collapsing during the global financial crisis. The new Supreme Leader, Mojtaba Khamenei, is the 56-year-old second son of the late Ayatollah Ali Khamenei. This marks the first father-to-son succession for the position since the 1979 Islamic Revolution. Having never held a formal government office, he is seen as a powerful, behind-the-scenes figure with close ties to the Islamic Revolutionary Guard Corps (IRGC). The decision to evacuate non-essential U.S. embassy staff is a significant indicator of escalating tensions. This measure is typically taken in response to specific, credible threats that could endanger American personnel. The move signals that the U.S. government perceives a heightened risk of attack or instability in Saudi Arabia, a key oil producer. While the G7 is weighing a coordinated release, the IEA's Executive Director Fatih Birol stated on March 6th that there were no immediate plans for collective action, describing the situation as a "logistical disruption" rather than a fundamental shortage, as there is "plenty of oil in the market". However, some individual countries like Japan are already preparing their reserves for a potential release. The United States' Strategic Petroleum Reserve, the world's largest, stood at 395.3 million barrels as of March 7, 2025. The elevation of Mojtaba Khamenei has been met with declarations of allegiance from Iranian institutions, including the military and the IRGC. His appointment is seen by supporters as ensuring continuity, while critics have raised concerns about the establishment of a hereditary leadership in a republic founded on the overthrow of a monarchy. A prolonged closure of the Strait of Hormuz would have severe consequences, as countries like Iran, Iraq, Kuwait, and Qatar are heavily reliant on it for their oil exports. While Saudi Arabia and the UAE have some pipeline capacity to bypass the strait, it is limited. The disruption also affects about 20% of the world's liquefied natural gas (LNG) trade, primarily from Qatar and the UAE.