Energy sector slides on G7 oil reserve release discussions
Coordinated 300-400M barrel release would be largest in history as Iran conflict drives prices to $114
Energy shares retreated Monday as G7 finance ministers convened emergency discussions on a coordinated release of strategic petroleum reserves, which would represent the largest such intervention in history if implemented. The proposed release of 300 to 400 million barrels—roughly 25 to 30 percent of total International Energy Agency reserves—comes as the Iran conflict has driven crude prices above $114 per barrel, a 23 percent surge since March 6.
The emergency meeting, reported by the Financial Times and confirmed by Bloomberg News, follows weeks of escalating tensions in the Middle East. Military strikes by the United States and Israel on Iran that began February 28 have effectively closed the Strait of Hormuz, the critical chokepoint through which approximately one-fifth of global oil supplies typically pass. Only Iran-linked vessels have been transiting the waterway since the conflict intensified, according to shipping reports.
Brent and West Texas Intermediate crude futures both reached approximately $114 per barrel on Monday, with WTI gaining 25 percent from its March 6 close. Goldman Sachs warned last week that prices could exceed $150 per barrel by the end of March if the Strait of Hormuz disruption persists.
The surge has pushed oil-related investment vehicles into historically overbought territory. The United States Oil Fund (USO) has risen 37 percent from late February to trade at $112.69 on Monday, with its 14-day Relative Strength Index hitting 94.5 on March 7 and March 8—levels that signal extreme technical exhaustion. An RSI above 70 typically indicates overbought conditions for an asset.
Three G7 nations, including the United States, have signaled support for the reserve release, though the IEA stated as recently as March 6 that it did not yet see an immediate need for coordinated intervention, citing ample global supplies and characterizing the disruption as logistical rather than a production shortfall. The agency nevertheless emphasized that "all options are on the table" and that it remains "ready to act" to stabilize markets.
The proposed release would substantially exceed the 60 million barrels released during the 2011 Libyan crisis, marking a dramatic escalation in G7 efforts to contain energy costs. Natural gas prices have also surged, with Europe's TTF benchmark spiking to €52–€53 per megawatt-hour and recording weekly gains exceeding 50 to 70 percent in some markets.
OPEC+ previously agreed on March 1 to boost output by 206,000 barrels per day to help offset potential shortfalls from Iran, but that production increase appears insufficient to counterbalance the shipping disruptions. The IEA's member countries hold approximately 1.2 billion barrels of emergency reserves, giving the alliance substantial ammunition if a coordinated release is ultimately approved.
Traders are bracing for significant volatility as the G7 discussions continue, with the overbought technical conditions in energy stocks and ETFs suggesting the sector is vulnerable to a sharp reversal if the reserve release materializes or if diplomatic progress reduces the threat to Middle Eastern oil supplies.