• The International Energy Agency warns commercial oil inventories are drawing down at a record pace, with shortages expected to persist into peak summer demand.
  • Rising diesel and fertilizer costs threaten to push food prices higher and reignite inflation, according to IEA chief Fatih Birol.
  • G7 finance ministers signal readiness to release strategic reserves again if needed, as geopolitical tensions around the Strait of Hormuz tighten supply.

The International Energy Agency sounded an alarm at the G7 finance ministers meeting in Paris, warning that global oil inventories are being depleted at an unprecedented rate. IEA chief Fatih Birol said commercial stocks fell by roughly 250 million barrels over March and April, and the market is likely to remain in deficit through the summer. “We are seeing a rapid drawdown that could intensify in the coming weeks,” Birol said, pointing to rising demand during travel and planting seasons.

The warning comes amid supply disruptions linked to the Iran conflict and restrictions around the Strait of Hormuz, a critical chokepoint for global oil flows. Birol highlighted that strategic reserves have already added millions of barrels per day to the market, but those buffers are finite. “Without action, we could see further price volatility,” he added.

French Finance Minister Roland Lescure said governments stand ready to intervene again. “If needed, we can coordinate additional releases from strategic reserves,” Lescure said, echoing a tool used in past crises. The G7 setting underscores the urgency, as coordinated policy responses are one of the few fast options to counter a supply shock.

The economic stakes are high. Birol warned that tighter oil balances are lifting diesel and fertilizer costs, which could feed into food prices and push inflation higher. “This is not just about energy markets; it’s about the cost of living for households and the competitiveness of farmers,” he said. The risk is particularly acute for import-dependent economies and emerging markets, where rising fuel costs can weaken currencies and worsen inflation.

Analysts note parallels to previous oil shocks, including the 1973 embargo and the 2022 surge after Russia’s invasion of Ukraine. In each case, supply disruptions during periods of weak spare capacity led to sustained price spikes and economic fallout. The current situation is structurally similar: constrained supply, elevated geopolitical risk, and fragile price stability.

Near term, the outlook hinges on whether the Gulf supply shock broadens or eases. The U.S. Energy Information Administration still expects Brent crude to ease later in 2026 and fall further in 2027, but that assumption depends on disruptions gradually unwinding. For now, the IEA’s warning injects a note of caution: inventories are falling fast, and the path of prices remains highly uncertain.

Bloomberg reached out to the IEA and G7 officials for comment but did not immediately receive responses.

Correction: A previous version of this article misstated the IEA’s inventory draw figure. The correct figure is about 250 million barrels over March and April.