Oil and gas prices surged sharply following escalated military strikes between Iran and Israel on energy infrastructure, triggering widespread concerns about sustained disruption to global energy supplies and spurring sharp declines across stock markets worldwide.
Brent crude, the global benchmark, initially jumped 10% to $119 a barrel before settling at $110, representing a 3.3% gain. Crude prices have soared 60% since hostilities began on February 28. The escalation centered on attacks against critical energy facilities. Israel targeted Iran's South Pars gasfield, prompting Iranian retaliation against Qatar's Ras Laffan, the world's largest liquefied natural gas facility.
QatarEnergy reported that Iranian strikes caused "extensive damage" to Ras Laffan and damaged facilities producing 17% of its LNG export capacity. Repairs could take three to five years. Shell's Pearl gas-to-liquids facility at the site also suffered damage, though the fire was quickly extinguished and no injuries were reported. Additionally, authorities in Abu Dhabi shut down operations at its Habshan gas facility and Bab oilfield following Iranian attacks.
Gas prices experienced even sharper increases. European gas prices jumped 24% to 68 euros per megawatt hour, their highest level since December 2022. UK wholesale gas prices more than doubled since late February, with the month-ahead price rising 23% to 172 pence per therm, its highest since August 2022. These price surges are likely to increase household utility bills significantly.
The energy consultancy Wood Mackenzie warned that attacks on Qatar's LNG hub have fundamentally altered the global gas market outlook. Initial expectations of a two-month disruption are now likely to be exceeded, with each additional month of disruption removing about 1.5% from annual global LNG availability.
The escalation triggered a sharp sell-off across global stock markets. Japan's Nikkei fell 3.4%, South Korea's Kospi dropped 2.7%, and Hong Kong's Hang Seng declined 2%. European markets followed suit, with the UK's FTSE 100 down 2.35%, Germany's Dax down 2.3%, and France's CAC 2.2% lower.
Analysts warned of broader economic consequences. Susannah Streeter, chief investment strategist at Wealth Club, stated that higher energy prices will create "toxic repercussions worldwide," particularly affecting Europe's reliance on Qatari LNG exports as countries wean themselves from Russian dependence. European airlines including Lufthansa announced that fares would rise if elevated fuel prices persist.
Thomas Pugh, chief economist at RSM UK, cautioned that sustained high energy prices could trigger second-round inflationary effects, potentially pushing inflation toward 5% by summer and making interest rate increases more likely from the Bank of England.
The conflict has expanded the risk profile for Middle East energy infrastructure, with analysts now assessing threats to export terminals, offshore facilities, and crucial shipping routes throughout the region.