- The Strait of Hormuz closure is sharply impacting global oil markets and supply chains
- IEA proposes largest oil release ever to address current supply shortage and market volatility
- Brent crude dropped to $88/barrel and WTI traded near $83 amid potential IEA intervention
The ongoing conflict in the Middle East has closed off the Strait of Hormuz, which continues to deeply impact the oil market, which has fallen sharply following reports that the International Energy Agency is proposing the largest ever oil release in its history, in an attempt to tackle the ongoing supply shortage.
After flirting with higher levels on Tuesday, Brent Crude has retreated to $88/barrel levels on Wednesday morning, whereas West Texas Intermediate traded near $83. The sharp drop reflects the impact of the potential IEA release, which would exceed the 182 million barrels that were released to the market during the height of the Ukraine-Russia war in 2022, according to a report from The Wall Street Journal.
Wednesday is going to be a crucial day, with countries expected to decide on the proposal. The report stated that the release will go through if every country is onboard with the plan. However, even one country protesting could significantly delay the plan.
The International Energy Agency (IEA) is a Paris-based autonomous organisation responsible for energy security and comprises 32 members and 13 Association countries, thus representing up to 75% of the global energy demand.
ALSO READ: Alternative For Hormuz Strait: How Global Oil Chokepoints Work And What They Mean For India
The road ahead for oil prices, therefore, could depend on developments surrounding the IEA release, although any negative development surrounding the Iran War could significantly put upward pressure on oil prices, which rose sharply on Tuesday following rapidly shifting comments from the Trump administration about the conflict and the Strait of Hormuz.
Trump had said late Monday that the war would end soon, but not this week, meaning investors are bracing themselves for a few more days of volatility in oil prices, at the very least.
Meanwhile, the global supply shortage in oil and gas has trickled down to India, with the nation currently grappling with a shortage of gas supply.
ALSO READ: Strait Of Hormuz Closure: Fuel Crisis Hits Southeast Asia; Vietnam, Thailand Push WFH, Four-Day Week
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