Oil and natural gas prices rose significantly on Wednesday, even after the International Energy Agency announced a release of emergency crude reserves. The market movement highlights deep concerns over supply security centered on the Strait of Hormuz.

Price Movements

Brent crude futures settled around $93 per barrel, while West Texas Intermediate (WTI) was near $88, both rising roughly 6% for the day. Since late February, Brent prices have increased by approximately 31%. Henry Hub natural gas futures also surged, gaining 6.8% to reach $3.23 per million British thermal units. European gas prices, as measured by TTF, have surged 56% to about €50 per megawatt hour.

Market Skepticism Over IEA Action

Analysts expressed doubt that the IEA's pledge to release 400 million barrels of reserves would stabilize markets. This skepticism stems from the ongoing effective blockade of the Strait of Hormuz, a critical chokepoint for about one-fifth of global oil and gas exports, due to attack threats from Iran. The U.S. Navy has reportedly refused near-daily requests from shippers for military escorts to protect tankers, despite public assurances from the U.S. President about safety.

Impact of the Strait of Hormuz Closure

The closure has already led Middle East producers like Iraq, Kuwait, and the UAE to curb output. The strait is particularly vital for Asian countries, which are heavily reliant on Middle East oil imports; approximately 90% of the gas volumes that transit the strait are also destined for Asia. Barclays warned that a long-term shutdown would have serious global price consequences as Asian markets compete for alternative energy sources. Wood Mackenzie estimated that if the strait remains closed, Asian refineries could reduce crude processing by roughly 6 million barrels per day in April.

Regional Vulnerabilities

The disruption exposes critical vulnerabilities in regional energy security. According to Wood Mackenzie, India faces the most severe pressure from the current situation.