Historic SPR Release Follows Persian Gulf Vessel Attack

Oil prices are rising as Iran escalates attacks on maritime vessels in the Persian Gulf. US WTI crude prices are up once again to around $95/bbl, while the international Brent crude price briefly moved back above $100/bbl. Rising prices come despite the historic release of strategic petroleum reserves by IEA members.

At least 6 cargo ships were reportedly struck by projectiles in the Strait of Hormuz and nearby Persian Gulf waters. According to maritime officials, one vessel departing the United Arab Emirates was hit and forced to evacuate its crew. Marine traffic was already slowed around the Strait of Hormuz, but the latest attacks suggest that even ships throughout the broader Persian Gulf are at risk. Iran warned that the world economy should prepare for $200/bbl oil in the future.

Despite the escalating conflict, Iranian crude exports have continued to flow at near-normal levels through the strait. Data indicates Iran has exported between 1.1 and 1.5 million barrels per day since late February, slightly below last year's average of 1.69 million barrels per day. Tehran has also allowed Indian-flagged tankers to transit the Strait of Hormuz, suggesting that while tensions remain high, some oil shipments are still moving through the corridor.

Historic Strategic Reserve Release

In response to the growing supply disruption, the International Energy Agency (IEA) announced the largest coordinated emergency oil release in history, involving 400 million barrels from strategic reserves.

The United States will contribute a significant share of the drawdown, releasing 172 million barrels from the Strategic Petroleum Reserve beginning next week. According to U.S. Energy Secretary Chris Wright, the release is expected to occur over approximately 120 days based on the government's discharge schedule.

Even with this unprecedented intervention, analysts warn that emergency reserves may only partially offset the scale of the disruption. Nearly 20 million barrels per day of crude and refined products normally pass through the Strait of Hormuz, meaning prolonged disruptions could quickly overwhelm the pace at which stockpiles can reach the market.

Physical Markets Signal Growing Supply Stress

While futures markets have fluctuated in response to political statements and reserve releases, conditions in physical oil markets suggest supply chains are already under strain. In Asia, the premium for physical cargoes of Middle Eastern crude has surged, with Dubai crude trading nearly $38 per barrel above its paper benchmark.

Refined product markets are also tightening rapidly. Diesel premiums in Singapore have climbed to record levels as refineries reduce processing rates and governments prioritize domestic fuel supplies. Some countries have already begun restricting fuel exports to preserve inventories.

Asia is particularly exposed to disruptions in the Persian Gulf, as it relies on the region for roughly 60% of its crude imports. As tanker traffic slows and freight costs increase, refiners are cutting operating rates and drawing down available stocks.

Analysts Raise Price Forecasts

Financial institutions have begun adjusting oil price forecasts as the likelihood of prolonged disruptions grows. Analysts now assume that flows through the Strait of Hormuz could remain severely reduced for roughly three weeks before gradually recovering.

Under this scenario, Brent crude could average around $98 per barrel during March and April before easing later in the year as supply conditions stabilize. In a more severe scenario where disruptions last longer, prices could climb significantly higher.

Market Outlook Hinges on Strait Reopening

The direction of global oil markets will ultimately depend on whether energy shipments through the Strait of Hormuz can resume safely. As long as tanker traffic remains threatened and regional tensions continue to escalate, supply risks will remain elevated.

Even with the largest coordinated strategic reserve release ever announced, the current disruption represents one of the most significant shocks to global energy markets in decades. Governments, refiners, and traders are now closely watching whether the conflict stabilizes, or whether the disruption to global oil supply deepens further.