Oil prices continued to climb on Thursday, despite a decision by the International Energy Agency (IEA) to release strategic petroleum reserves, signaling persistent market concerns over supply disruptions.
Brent crude, the global benchmark, rose 8.52% to $99.82 a barrel as of 6:20 PM, while West Texas Intermediate (WTI) gained 9.11% to $95.16 a barrel. The surge in prices reflects anxieties surrounding potential inflation as the conflict in the Middle East threatens key energy chokepoints.
The IEA, representing 32 countries including the United States, announced on Wednesday the release of 400 million barrels of oil from strategic reserves – a record amount – in an attempt to stabilize the market. However, the move has so far failed to curb the upward price momentum. “In market language, the IEA release is like pointing a hose at a refinery fire,” said Stephen Innes, manager at SPI AM.
Situation “Not Under Control”
Adding to supply concerns, French energy giant TotalEnergies announced Thursday that it has suspended, or is in the process of suspending, the equivalent of 15% of its global oil and gas production across several Gulf states.
“Production has been stopped or is in the process of stopping in Qatar, Iraq and offshore in the United Arab Emirates, representing around 15% of our total production,” the company stated in a release, clarifying that both oil and gas production are affected. This decision underscores the growing operational challenges facing energy companies in the region.
The IEA reported Thursday that countries in the Gulf are currently reducing oil production by at least 10 million barrels per day due to the blockage of the Strait of Hormuz, representing “the largest supply disruption” in history.
Mojtaba Khamenei, the new supreme guide of Iran, called for the continued closure of the Strait of Hormuz in his first public statement on Wednesday, though the country’s deputy foreign minister assured that “countries” had requested passage and that “we have cooperated with them.” U.S. President Donald Trump stated that the increase in oil prices is secondary to the require to “stop” Iran.
According to Alexandre Baradez, head of market analysis at IG France, “markets clearly observe that the situation is absolutely not under control.” The ongoing uncertainty is also weighing on global stock markets. As of 5:50 PM, the Nasdaq was down 1.41%, the S&P 500 had fallen 1.17%, and the Dow Jones Industrial Average lost 1.18%.
European markets also experienced declines, with Paris and Milan down 0.71%. London fell 0.47% and Frankfurt shed 0.21%. The Swiss stock exchange closed down 0.9%.
Inflation Concerns and Rising Rates
Reflecting the continued tensions, interest rates on debt issued by European countries are rising, driven by fears of renewed inflation on the continent, which is heavily reliant on hydrocarbon imports. “The market sees the current situation as a potential supply shock: less supply for high demand, which risks causing inflation,” explained Kevin Thozet, a member of the investment committee at Carmignac, to AFP.
Higher inflation erodes the real value of payments made by borrowers to creditors. Creditors demand higher interest rates to maintain profitability. The rate on the German 10-year bond, a European benchmark, climbed to 2.95% during the session, its highest level since 2023. The French equivalent rose to 3.61%, compared to 3.57% at Wednesday’s close.
Outside the Eurozone, the British 10-year interest rate finished around 4.76%, up from 4.69% on Wednesday.
“The Classic Continent is ‘the zone where the most energy is imported’ and remains therefore ‘very sensitive to an increase in the cost’ of hydrocarbons,” noted Guy Stear, head of strategy for developed markets at Amundi Investment Institute.
The U.S. Dollar, the international currency of the oil market, continues to benefit from the conflict. The greenback, which had been losing ground in recent months due to uncertainties surrounding Donald Trump’s policies, has gained more than 2% against the euro since the beginning of the year.
It gained 0.38% to 1.1524 dollars per euro as of 5:55 PM.
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