Global Rush to Build Oil Reserves as Iran War Leaves Scars

The recent Iran war has triggered a global rush to build oil reserves as vulnerable countries seek to protect themselves from future economic shocks. During the conflict, the near-total closure of the Strait of Hormuz cut off around 20% of global oil and liquefied natural gas supplies for over three months, pushing Brent crude prices to nearly $120 a barrel.

The world's ability to tap emergency reserves was a key stabilizing force during this period. The International Energy Agency (IEA) coordinated a record 400 million-barrel release from strategic petroleum reserves (SPRs), with the US contributing the largest share.

China, not a full IEA member but with its own massive SPR holding over 1 billion barrels, reduced crude purchases by more than a third during the war. This move saved Beijing billions of dollars and helped insulate it from economic distress seen elsewhere in Asia, which relies heavily on Middle Eastern energy imports.

Much like China, other countries are now seeking to expand their SPRs where fiscal space allows or strengthen demand-reduction plans instead. India, for example, is set to become the single biggest source of global oil demand growth through 2030 but has a reserve that covers only eight days of imports and is aiming to increase it by building a new 1.75 million-tonne reserve.