Why Oil Pushed Past $100 A Barrel Despite Historical Release Of Reserves

Oil markets brushed aside one of the largest emergency interventions in history on Thursday, sending Brent crude oil prices back above the $100-per-barrel mark.

The surge came even after member countries of the International Energy Agency (IEA) agreed to release 400 million barrels from strategic reserves, the biggest coordinated drawdown since the agency was created following the 1973 oil crisis.

Instead of cooling prices, the move underscored a deeper concern gripping traders: the risk of a prolonged disruption to global energy flows from the Middle East, particularly around the Strait of Hormuz, one of the world's most critical oil chokepoints. 

Brent crude rose roughly 8-9 per cent to cross the $100 mark again in Asian trading on Thursday, while US benchmark West Texas Intermediate climbed to around $95 per barrel. The rally signals that markets are focusing less on emergency supply releases and more on the risk that physical shipments may be interrupted.

A Record Reserve Release, But Only A Temporary Buffer

The IEA's coordinated release is intended to inject additional supply into the market over the coming months. The United States alone plans to release about 172 million barrels from its Strategic Petroleum Reserve, with shipments expected to begin within weeks.

Such releases can help stabilise markets during temporary disruptions, but analysts say they cannot fully offset the scale of potential supply shocks if shipping routes are compromised.

Estimates suggest the reserve drawdown would cover only a fraction of the supply gap that could emerge if tanker traffic through the Strait of Hormuz is significantly (or completely) disrupted. The market reaction reflects doubts over how quickly those barrels can reach refineries and whether they would compensate for lost Middle Eastern shipments.

Oil markets, which already tightened after the escalation of the US-Israel conflict with Iran, have been pricing in the possibility that the crisis could last far longer than anticipated.

Strait Of Hormuz: World's Most Sensitive Energy Chokepoint

The geopolitical flashpoint now dominating energy markets is the Strait of Hormuz, a narrow maritime corridor between Iran and Oman that connects the Persian Gulf to the Arabian Sea.

Despite being only about 33 kilometres wide at its narrowest point, the strait carries around one-fifth of the world's oil supply. Tankers transporting crude from major Gulf producers -- including Saudi Arabia, Iraq, Kuwait, the UAE and Qatar -- must pass through this channel to reach global markets.

In 2025, roughly 15 million barrels per day of crude and another 5 million barrels of refined products moved through the strait. Any disruption, even temporary, can ripple across global energy markets almost instantly.  

That vulnerability has been thrust back into focus as tensions escalate in the region. Iran's Islamic Revolutionary Guard Corps (IRGC) has said it will not allow "a litre of oil" through the Strait of Hormuz. "You will not be able to artificially lower the price of oil. Expect oil at $200 per barrel," the IRGC spokesperson said in a statement.

Even if the waterway is not formally closed, the mere threat of attacks can choke tanker traffic, drive up insurance costs and slow shipments -- tightening supply in global markets.  For traders, that risk premium now outweighs the reassurance provided by emergency reserve releases.

Markets Pricing In A Longer Conflict

Another factor behind the price surge is the growing belief that the conflict may not end quickly.

Diplomatic signals suggest that negotiations remain distant. Iran has reportedly conveyed through intermediaries that any ceasefire would require guarantees that the United States and Israel would refrain from future attacks and compensate Tehran for damages -- conditions that Washington is unlikely to accept.

This deadlock has led traders to assume that supply risks in the Gulf could persist for months, keeping volatility elevated.

The latest price spike also reflects a shift in market psychology: the focus has moved from short-term supply injections to the structural risk of disrupted maritime trade routes. FOLLOW LIVE UPDATES

What It Means For India

For India, the stakes are particularly high because of its dependence on imported energy. The country imports around 90 per cent of its crude oil needs, with roughly 45-50 per cent of those supplies sourced from the Middle East.

A large portion of these shipments pass through the Strait of Hormuz. Estimates suggest about 40-50 per cent of India's crude imports transit the waterway, making it a key vulnerability for the country's energy security. Any disruption there can quickly translate into higher costs for India.

Analysts warn that a sustained rise in oil prices would increase the country's import bill, widen the current account deficit and potentially add to inflation. Even if supplies remain available, longer shipping routes, higher freight charges and rising insurance premiums could raise the cost of crude.  

The Indian government has said it is closely monitoring developments and has adequate reserves to manage short-term disruptions. At the same time, refiners have begun exploring alternative sources, including increased purchases from Russia and other suppliers, to reduce reliance on Gulf shipments.

However, those alternatives are unlikely to fully replace Middle Eastern supplies in the near term. For now, the trajectory of oil prices, and their impact on economies such as India, will depend largely on whether tanker traffic through the Strait of Hormuz remains open and whether the conflict in the region escalates further.