The International Energy Agency (IEA) has agreed to release a record 400 million barrels of oil from strategic stockpiles in a bid to steady global crude markets following the outbreak of war involving the United States, Israel and Iran.
The decision marks the largest coordinated emergency oil release ever proposed by the Paris-based energy watchdog.
It comes after fears of supply disruptions linked to tensions around the Strait of Hormuz sent global oil prices sharply higher earlier this week.
Strategic stockpile releases are typically used to stabilise markets during supply shocks by temporarily increasing the amount of oil available.
According to David Fyfe, chief economist at Argus Media, such measures mainly serve as a short-term bridge for markets under stress.
“They are intended to boost physical liquidity while producers and traders reorganise supply chains, or until the disruption itself eases,” he said.
The scale of the latest intervention is unprecedented.
If the full 400 million barrels were released over three months, it could add roughly 4.4 million barrels per day to global supply. However, the actual impact will depend on how quickly governments choose to release their reserves and how the market absorbs the additional crude.
Under the IEA framework, member governments retain discretion over how and when their strategic reserves are deployed, meaning the pace of supply reaching the market could vary significantly.
Markets may already be reacting to the prospect of coordinated action.
Earlier this week, rumours of an emergency stock release coincided with a sharp drop in futures prices for Brent crude. Prices slipped from close to $120 per barrel to around $90, as traders began anticipating a possible intervention.
Still, analysts warn that the effectiveness of strategic reserves will largely depend on developments in the Gulf.
If shipping through the Strait of Hormuz remains restricted for an extended period, stockpile releases alone may struggle to keep prices in check.
Strategic reserves, by nature, are temporary buffers and cannot permanently offset a prolonged disruption along one of the world’s most critical oil transit routes.
Despite the volatility, demand for physical crude remains strong.
Tom Reed, head of China crude and products at Argus Media, says buyers have little choice but to stay active in the market.
Even in China — which holds vast strategic petroleum reserves comparable in size to the entire IEA stockpile — refiners are returning to the market and paying elevated prices for cargoes.
Energy companies understand that even large national inventories cannot sustain indefinite releases to compensate for a disruption of this scale.
That reality is contributing to a growing divergence between paper markets and physical trading.
Futures prices can fall quickly when traders expect government intervention or improved supply conditions. Physical cargoes, however, often remain expensive when refiners urgently need feedstock.
As Reed puts it, futures prices reflect market sentiment, while a cargo of jet fuel or naphtha available today reflects the immediate reality of supply and demand.
For now, the coordinated release of strategic reserves may help ease the panic that swept through oil markets earlier this week.
But the long-term direction of prices will depend less on stockpiles — and more on whether oil continues to flow freely through the Gulf.