G7 Drops a 400 Million Barrel Bombshell As Oil Price Hits $120

G7 governments are weighing a coordinated release of up to 400 million barrels from strategic petroleum reserves.

This is the largest such intervention on record and comes after oil prices surged to near $120 per barrel amid threats to the Strait of Hormuz.

G7 Plans Largest-Ever Oil Reserve Release as Hormuz Crisis Drives Prices to $120

According to a report on the Financial Times, the proposal would be coordinated through the International Energy Agency (IEA).

Three G7 members, including the US, have signaled support. Japan, which holds the world’s third-largest petroleum reserves, initially denied a final decision had been made but confirmed it was monitoring the situation closely.

This proposal sent oil prices tumbling to lows of $100,139, down almost 17% since the local top. As of this writing, Oil price was $103,682.

Why Oil Markets Are Fracturing

The Strait of Hormuz sits at the center of the crisis. Approximately 20% of global oil supply transits this single waterway, and ongoing threats from Iran have raised the specter of a prolonged blockade.

Japan is among the most exposed nations, with over 90% of its crude imports routed through the strait.

US oil prices have risen by more than $55 per barrel over the past three months, a near doubling. Models suggest that if prices hold at current levels, US GDP growth could contract by 0.5%, erasing approximately $160 billion in economic output.

HFI Research cautioned that even the proposed release may only be a temporary fix. Its estimate indicates tanker flow disruptions through late March could drain roughly 450 million barrels from global inventories, slightly more than the entire proposed reserve drawdown.

Iraq and Kuwait have also begun shutting in production, with the UAE expected to follow.

Markets React — and Traders Pay the Price

Oil’s price action on Monday has been extreme, as indicated in the chart above. The volatility extracted real losses.

On-chain analytics firm Arkham identified a wallet linked to known meme coin trader CBB0FE as being down $3.5 million on a $12 million crude short position, opened as prices surged more than 50% since the previous week.

A separate trader took the opposite position at the right moment. According to market observer legen.eth, an account opened a 5x leveraged short on crude oil roughly two hours before the G7 reserve reports emerged. This trader walked away up over $1 million as oil prices fell.

The Fed Policy Debate

Beyond the immediate price moves, investor Anthony Pompliano argued the oil spike should not distort broader monetary policy thinking.

“If oil continues going higher, you will hear lots of people say the Fed should avoid cutting rates out of fear of potential inflation. This is the same mistake these folks made during tariffs… The Fed should be aggressively cutting rates in the first half of this year,” wrote Pompliano.

Pompliano’s view rests on the argument that the US is operating in a structurally deflationary environment. This makes a single commodity input, even one as significant as oil, an insufficient basis for holding rates steady.

President Trump, meanwhile, told reporters oil prices would “drop rapidly” once the Iran nuclear threat was resolved, calling it “a very small price to pay.”

Strategic oil reserves have historically been deployed only during acute global disruptions. Among them was the First Gulf War in 1990 and the 2011 Fukushima disaster.

The scale of the current proposal signals that policymakers view the Hormuz threat as comparable in severity.

However, HFI Research flagged that any reserve release creates a subsequent demand overhang: stockpiles must eventually be refilled, adding future pressure to oil markets.

Could the intervention stabilize prices, or will it only delay a deeper supply reckoning? All these hinge on how quickly, or whether, Hormuz shipping lanes return to normal.

Follow us on X to get the latest news as it happensSubscribe to our YouTube channel to watch leaders and journalists provide expert insights