International oil prices have surged past $100

Last weekend, the wave of production cuts by Middle Eastern oil-producing countries accelerated. The Strait of Hormuz remained nearly closed, oil producers were forced to limit or halt production, and storage capacity was nearing exhaustion, putting severe pressure on global energy supplies. Market concerns over supply risks caused international crude oil futures prices to break through $100 per barrel at the start of the new week, marking the first time since mid-2022 that this key threshold was surpassed. Prices peaked near $120 per barrel at one point. However, news that the G7 plans to coordinate the release of oil reserves quickly halved the price gains.

Sharp Fluctuations

Data shows that as of 8 p.m. Beijing time on the 9th, the May delivery light crude oil futures on the New York Mercantile Exchange reached a high of $119.48 per barrel, now retreating to $100.58. The June delivery London Brent crude futures peaked at $119.50, now down to $102.51.

The near-paralysis of the Strait of Hormuz has become a key trigger for the surge in oil prices. Yan Jiantao, chief analyst at Jucheng Energy, said, “Saudi Arabia, the UAE, and Kuwait’s oil storage facilities are nearing capacity. Due to the closure of the Strait of Hormuz, large amounts of oil cannot be shipped out, causing severe backlogs. About 20% of global oil consumption relies on exports through this strait, but shipping companies are wary of Iran launching attacks, and tankers are unwilling to risk passing through this narrow waterway. This means if oil cannot pass through the strait, major oil fields could face shutdowns.”

Reports indicate that oil-producing countries such as Iraq, Kuwait, and the UAE have reduced output due to insufficient storage capacity. Additionally, Han Zhengji, an analyst at Jinjian Chuang, added that Saudi Arabia has shut down its largest domestic refinery and is attempting to reroute some crude exports to the Red Sea. Qatar also announced it has halted some energy production. “This means the blockade of the Strait of Hormuz has effectively impacted oil production in Middle Eastern countries, and over time, this force majeure-induced reduction in output caused by inventory caps could further expand.”

Furthermore, Iraq’s oil production has actually collapsed. Reuters, citing sources, reported that due to conflicts in the Middle East, Iraq’s crude oil cannot be exported via the Strait of Hormuz. The country’s main oil fields in the south have reduced output by nearly 70%, now only producing about 1.3 million barrels per day, down from approximately 4.3 million barrels before the escalation of regional tensions. Meanwhile, Iraq’s oil exports have also plummeted to about 800,000 barrels per day on average, compared to 3.334 million barrels daily in February.

Iraq is OPEC’s second-largest oil producer, with over 70% of its crude used for export. Due to the disruption of shipping through the Strait of Hormuz, ships cannot reach southern Iraqi ports, and local oil reserves have reached maximum capacity. As of the evening of the 8th local time, only two tankers had completed loading, and with no new arrivals, oil loading operations at the ports have been halted. Iraq has been forced to significantly cut production, prioritizing supply to its domestic refineries.

Market Chain Reaction

After international oil prices broke through $100, the market quickly felt the impact. On March 9, during Asian trading hours, risk aversion swept global markets. The Asia-Pacific benchmark stock indices fell more than 5%, marking the largest intraday decline since April last year. South Korea’s stock market dropped over 8%, and Japan’s stock market fell more than 7%. U.S. and European stock index futures also continued to decline.

In addition to impacting capital markets, rising international oil prices will have divergent effects on economies worldwide. Yan Jiantao told Beijing Business Today that a 10% increase in oil prices could lead to a clear “two extremes”: Canada and Latin America, benefiting from energy exports, could see slight GDP growth, while most other regions would face economic tightening.

The Financial Times reported that the surge in international oil prices has put enormous pressure on the Trump administration. As of March 8, the average U.S. gasoline price had increased by nearly 50 cents per gallon compared to a week earlier, with no signs of easing. According to the American Automobile Association (AAA), last Sunday, retail gasoline prices in the U.S. reached $3.45 per gallon, up 16% from the previous week.

Analysts say that with WTI crude rising, U.S. retail gasoline prices could reach $4 per gallon. This alone could increase the overall Consumer Price Index (CPI) year-on-year by about 0.3-0.5 percentage points. When including diesel, airfare, food prices, petrochemical and plastic products, utilities, and other factors, the Federal Reserve and other global central banks will face serious challenges.

Yan Jiantao pointed out that Central and Eastern Europe, with the highest energy dependence, will suffer the most, with GDP estimated to shrink by 0.39%. India and the Eurozone will also be significantly affected, above the global average. In contrast, China and the U.S., with stronger economies, energy self-sufficiency, or policy buffers, show greater resilience, with GDP declines kept within 0.1%.

JPMorgan Chase analysts estimate that every $10 increase in oil prices could raise the U.S. core inflation indicator, which the Fed monitors closely, by 0.1 percentage points, while U.S. GDP growth could slow by 0.2 percentage points.

Coordinated Reserve Releases

Regarding future oil price trends, Jin Ye, fund manager of Galaxy Value Growth Hybrid Fund, said that the current stage is characterized by high oil prices. If the Middle East conflict does not end, there is a possibility that prices will remain high or continue to rise. Even if tensions ease, due to damaged facilities and the time needed to restore transportation, the low points after a price decline may still be above the $60 per barrel level seen in early 2026.

Some analyses suggest that as storage facilities gradually fill, more oil-producing countries will be forced to cut production. If supply disruptions persist, governments will face increasing pressure to use strategic reserves. Even if the Strait of Hormuz reopens, market rebalancing will take weeks due to transportation cycles, and supply chains will need time to recover.

Xinhua News Agency cited the Financial Times reporting that later on the 9th, the G7 will hold an emergency meeting to discuss the possibility of jointly releasing oil reserves under coordination with the International Energy Agency to address the surge in oil prices caused by the escalation in the Middle East. The Japanese Ministry of Economy, Trade and Industry also stated that it has asked domestic oil reserves to prepare for release.

Sources said that G7 officials and IEA Director Fatih Birol will hold a conference call to discuss the impact of the Middle East situation. Some U.S. officials have suggested releasing 300 to 400 million barrels, about 25% to 30% of the 1.2 billion barrels of reserves.

Just three days ago, Birol had a very different stance. He said at the time that global oil supply remains ample. When asked whether the IEA is considering using emergency reserves, Birol replied, “All options are on the table,” but there are no plans to do so at this stage. He stated, “We do not currently face an oil shortage; the issue is temporary logistical disruptions.”