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Finance ministers from the Group of Seven (G7) countries will meet to assess the growing economic impact of the crisis, with energy prices emerging as a key concern. Among those attending the discussion is UK Chancellor Rachel Reeves.
The meeting comes at a time when global markets are reacting nervously to the intensifying conflict in the Middle East. Oil prices surged sharply on Monday, with crude briefly approaching 120 dollar per barrel before easing slightly later in the day. The spike has been driven largely by fears that the conflict could disrupt energy supplies from the region.
A major worry for markets is the situation around the strategically crucial Strait of Hormuz, a narrow shipping route through which roughly one-fifth of the world’s oil and gas shipments typically pass. Reports indicate that the route has effectively been shut for about a week due to rising military tensions, raising alarm over possible supply shortages.
Amid these concerns, Brent crude, the global oil benchmark, jumped as much as 29% during early trading on Monday, touching around 119.50 dollar a barrel. Prices later eased to around 106.73 dollars after news of the G7 discussions emerged, though they remained significantly higher than last week’s levels.
The turmoil has also rattled global stock markets. In London, the FTSE 100 dropped sharply, while major European indices also recorded losses. Germany’s DAX slipped nearly 1%, and France’s CAC 40 fell around 0.7%. The broader Stoxx Europe 600 index also declined, wiping out gains accumulated earlier this year.
Asian markets mirrored the downward trend as investors worried that prolonged instability in the Middle East could trigger a wider economic shock.
One proposal likely to be discussed during the G7 meeting is the possibility of releasing emergency oil reserves to calm markets. According to reports, several G7 members, including the United States, are supportive of coordinating such a move through the International Energy Agency (IEA).
The IEA maintains large strategic petroleum reserves as part of an emergency system designed to help countries manage sudden disruptions in energy supply. These reserves are held by 32 member nations across the world.
US officials reportedly believe that releasing between 300 million and 400 million barrels of oil from these reserves could help stabilise prices. That amount would represent roughly a quarter to a third of the total 1.2 billion barrels currently stored under the system.
Meanwhile, European authorities are also closely monitoring the situation. Officials from the European Union are expected to convene meetings later this week to evaluate the potential impact of the conflict on the region’s energy supplies. EU countries are required to maintain oil reserves that can cover at least 90 days of consumption.
Energy prices across Europe have already begun climbing. In the UK, the price for month-ahead natural gas surged by nearly 19% on Monday morning. Gas benchmarks across continental Europe also rose significantly.
The tensions have intensified following reports of strikes targeting energy infrastructure in and around Tehran. At least five energy facilities were reportedly hit during the latest wave of attacks. Meanwhile, Kuwait’s national oil company announced a precautionary reduction in production due to the regional instability.
Political leaders involved in the conflict have offered starkly different views on the economic fallout. Former US president Donald Trump said rising oil prices were “a very small price to pay” for ensuring security and stability in the region, describing the spike as a temporary consequence of the conflict.
Iran, however, warned that continued military strikes could push energy prices even higher. A spokesperson for the country’s Revolutionary Guard cautioned that global markets could face oil prices exceeding 200 dollar per barrel if the conflict continues to escalate.
The emergency oil reserve system now being considered by G7 nations was originally established in the 1970s after the global energy crisis triggered by the Arab oil embargo. Since then, coordinated releases have been used only a handful of times to ease supply shocks, including during the global disruption caused by Russia’s invasion of Ukraine.