G7 Monitoring Impact of Iran Conflict on Global Markets
G7 energy and finance ministers have expressed concern over the ongoing conflict in Iran and its impact on global energy and commodity markets, inflation, and economic stability. In a recent statement, they emphasized their readiness to take “any necessary measures” to ensure the security and stability of energy markets. The statement highlighted the importance of coordinated international action to mitigate spillover effects and safeguard macroeconomic stability.
Despite not reaching any concrete decisions, such as a new release of oil reserves, the discussions are expected to lead to an assessment by European energy ministers on Tuesday. This meeting will focus on energy security and supply levels across the EU, which is currently dealing with an oil crisis that has been compared to the 1970s by Fatih Birol, the head of the International Energy Agency (IEA).
The IEA has already coordinated the release of 400 million barrels of oil on 11 March to address the shortfall caused by the Hormuz blockage following US and Israeli attacks against Iran. However, this measure has not been sufficient to curb rising oil prices. Regular meetings between EU technical experts in oil and gas have been held to assess the severity of the situation.
The European Commission acknowledges that the bloc is primarily facing price volatility. However, Tuesday’s meeting aims to evaluate current reserves amid increasing unpredictability, particularly as LNG tankers heading to Europe have been diverted to Asia due to higher prices.
The sudden drop in oil and natural gas prices has sent shockwaves through markets, pushing Brent crude oil to $119 per barrel, up from around $70 before the war. Analysts predict that oil prices could reach $200 if the conflict continues. For natural gas, analysts forecast prices could return to levels seen during the 2022 energy crisis, when the EU lost 44% to 45% of its imports from Russia after Moscow’s invasion of Ukraine.
The virtual meeting comes one day before EU energy ministers are set to discuss supply security. G7 countries are holding more urgent meetings to address the global economic consequences of the conflict, which has now entered its second month.
Inflationary pressures and rising borrowing costs are making the looming crisis harder to ignore for the G7. With oil and gas prices surging, there is growing fear that a prolonged conflict could disrupt global supply chains, as key commodities, including fertilizers, become trapped in the Strait of Hormuz, which has been effectively closed since the conflict began.
US President Donald Trump recently announced “great progress” in negotiations with Tehran. However, he warned of potential attacks on Iranian power plants, oil infrastructure, and desalination plants if a deal is not reached soon, which could further fuel market speculation.
In the meantime, the G7 has agreed to secure the Strait of Hormuz, but only after the war between the United States, Israel, and Iran ends.
Calls for Long-Term Energy Strategy
European Commissioner for Energy Dan Jørgensen called for targeted measures aligned with a long-term strategy, including reducing fossil fuel imports, boosting renewable energy production, and establishing an energy union. He emphasized the need for the bloc to “double down on our path to energy independence” by upgrading grid infrastructure, which is crucial for optimizing renewable power flows and avoiding grid congestion and curtailment.
Jørgensen urged MEPs on March 25 to support a “swift and ambitious agreement (Grids Package)” to accelerate infrastructure-building and interconnections that are desperately needed.
National Measures Being Taken
In response to the crisis, some European countries have already implemented national measures. Poland will introduce a fuel price cap starting Tuesday, as announced by Energy Minister Miłosz Motyka. This follows similar actions by Hungary and Croatia, which introduced their price caps in early March.
Mared Gwyn Jones contributed to the reporting.
