Group of Seven leaders fell short of reaching an agreement to contain soaring oil prices that are shaking global stock markets and pushing up prices at the pump, as the U.S.-Israeli war with Iran marks its 10th day.
The G-7 leaders met Monday to discuss tapping into emergency oil reserves, they but emerged without a plan to immediately release that crude into the marketplace.
“We’re not there yet,” said Roland Lescure, the finance minister of France, speaking to reporters in Brussels following the meeting. “We’ve agreed to monitor the situation very closely.”
The lack of action leaves open the possibility that oil prices will continue to climb, potentially triggering broader inflation at a time when many U.S. consumers are already expressing concerns about affordability.
Oil prices shot overnight to heights not seen since the aftermath of Russia’s invasion of Ukraine. The price for a barrel of Brent crude, the global oil benchmark, spiked to just shy of $120 before settling down to about $105. That’s about 50 percent higher than the prewar price.
Monday’s spike in oil prices led to a drop in global stock markets. The Dow Jones Industrial Index, Nasdaq and S&P 500 each were down about 1 percent to start the day. Earlier, Japan’s Nikkei index plunged about 5 percent. European stock markets shed 1 to 2 percent.
The fallout goes well beyond oil traders and big investors.
A price of $100 per barrel often translates into an average of $4 a gallon at U.S. gas pumps, according to analysts, an important psychological barrier that, unlike most economic numbers, is broadcast from nearly every street corner.
Prices at the pump in the U.S. are now 47 cents higher than a week ago, according to AAA, averaging $3.48 for a gallon of regular.
The problem is that the missiles flying into and out of Iran have compromised the safety of the Strait of Hormuz, a choke point for roughly one-fifth of the world’s oil supply. Tankers aren’t confident that they can sail through, which leaves Persian Gulf states without a ready way to ship their oil.
“Exports will not resume until ship owners, operators, and insurers feel sufficiently safe from the threat environment posed by Iranian warships and aircraft, missiles, drones, speedboats, and naval mines,” said an email from Clayton Seigle, an energy and geopolitics scholar at the Center for Strategic and International Studies.
While most of the oil through the strait goes to Asia, it is a commodity sold on the global market. That means prices for oil produced in the U.S. are surging alongside the oil shipped from the Gulf, leaving American motorists exposed to price shocks.
After President Donald Trump had made affordability and lowering energy prices a cornerstone of his political message, analysts had earlier assumed he would seek a diplomatic compromise with Iran that gets oil flowing again. But the president has given no indication that he intends to broker such a deal.
On Sunday night, as oil prices soared toward $120 per barrel, he wrote in a social media post that the spike in prices “is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!”
Trump has separately suggested that oil tankers in the gulf could be protected with government-backed risk insurance and military escorts.
His administration has also sought to tamp down oil prices by easing some sanctions on Russia. It provided a waiver that allows India to purchase Russian oil for 30 days, and Treasury Secretary Scott Bessent has said further sanctions relief is possible.
If the Iran conflict becomes protracted, even tapping into oil reserves would only provide temporary relief.
The entire U.S. Strategic Petroleum Reserve holds about 415 million barrels of oil. It is enough to cover less than four days of global oil demand, or just a few weeks of the supply choked at the strait. Federal officials and lawmakers will be reluctant to draw down more than a third of that amount, as replenishing it typically cannot be done quickly.
“There is simply no substitute for restoring access through the Strait of Hormuz,” said an email from Angie Gildea, global head of oil and gas at KPMG. “The tools at our disposal, including strategic reserves, rerouting some exports and floating inventories, can provide some relief at the margins, but they are not structural solutions. We are in uncharted waters.”
Diesel prices are surging even faster than gasoline, spelling more trouble for the economy.
Diesel hit $4.66 a gallon Monday, up nearly 90 cents from a week ago. Analysts widely expect it to spike past $5 within weeks. It is already nearly $6 in California.
Diesel is used in the shipping of almost every consumer product, so the rocketing cost of the fuel is certain to make goods more expensive.
UPS, the largest shipping company in the U.S., has already tacked on a weekly fuel surcharge.
Container shipping companies are starting to do the same. And farmers also may soon be raising their prices, as they rely on diesel to power their industrial equipment.
Ellen Francis in Brussels contributed to this report.
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