Energy Prices Surge 28% as Iran Strikes Gulf Energy Infrastructure in Retaliation for Israeli Attacks
European gas prices experienced a dramatic surge of 28% and oil prices increased by 6% on Thursday following Iranian attacks on energy infrastructure in the Middle East. This escalation marks a significant development in the ongoing conflict that has persisted for nearly three weeks, as Iran retaliated against Israeli strikes on its gas facilities.
The Iranian aerial assaults inflicted considerable damage on the world’s largest gas plant located in Qatar, targeted a refinery in Saudi Arabia, and compelled the United Arab Emirates to shut down gas facilities. Fires were also reported at two refineries in Kuwait.
Benchmark Brent crude oil prices rose above $114 per barrel, peaking at $119 earlier in the day. In Europe, gas prices reached levels that were double those recorded in late February, prior to the onset of hostilities between the U.S., Israel, and Iran. Dutch gas prices hit 74 euros ($84.97) per megawatt hour, the highest since January 2023.
Charu Chanana, Chief Investment Strategist at Saxo in Singapore, remarked on the situation, stating, “This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines or the closure of the Strait of Hormuz. It is now hitting the plumbing of the global energy system. What is unsettling markets now is the growing stagflation risk.”
European Leaders Seek Quick Fixes
In response to these developments, European leaders convened on Thursday to explore immediate solutions aimed at mitigating the surging energy prices resulting from the ongoing tit-for-tat attacks on critical infrastructure and the closure of the Strait of Hormuz. This strategic waterway is vital, as it typically facilitates around 20% of global oil and liquefied natural gas supplies.
However, skepticism exists among some governments regarding the European Union’s capacity to effectively counteract the price spike. The EU comprises 27 member states, each with distinct energy mixes and national taxation policies, complicating collective action.
The assaults on Iran’s South Pars and Qatar’s Ras Laffan plant signify a sharp escalation in both the conflict and its ramifications for energy markets. Rob McLeod, Head of Energy Price Risk Solutions at Hartree Partners, noted that the extent of infrastructure damage could result in facilities being offline for months or even years, rather than weeks.
South Pars represents the Iranian sector of the world’s largest natural gas deposit, which Iran shares with Qatar, a close U.S. ally. Qatar’s foreign ministry condemned Israel for what it described as a “dangerous and irresponsible” attack on Iranian facilities, labeling Iran’s response a “flagrant breach” of international law and expelling two senior Iranian diplomats.
Attacks on Saudi and Kuwaiti Infrastructure
On the same day, a drone strike targeted the Aramco-Exxon refinery, known as SAMREF, with the Saudi Arabian Defense Ministry confirming that damage assessments were underway. Additionally, a ballistic missile aimed at Yanbu, a crucial Red Sea port city and Saudi Arabia’s sole outlet for crude exports, was intercepted. Reports indicated that oil loadings at Yanbu were briefly halted.
In Kuwait, operational units at the Mina al-Ahmadi and Mina Abdullah refineries were also targeted by drones, resulting in fires at both locations, according to the state news agency.
Extensive Damage Reported at Ras Laffan
QatarEnergy, the state oil company and the world’s second-largest LNG exporter, reported extensive damage at Ras Laffan, the site of its core LNG processing operations, due to Iranian missile attacks. The UAE also shut down gas facilities after intercepting missiles early on Thursday.
QatarEnergy stated that its emergency response team was deployed immediately to manage the fires caused by the attacks. By early Thursday, all fires at Ras Laffan had been contained, with no injuries reported, according to Qatar’s Interior Ministry.
Saul Kavonic, Head of Research at Australia’s MST Marquee, indicated that the attacks on Ras Laffan could lead to a lasting global gas shortage. However, he noted that this situation would not exert pressure on the U.S. administration, as high global gas prices could be economically beneficial for the U.S. Qatar produces 77 million metric tons of LNG annually, primarily for power generation and industrial use. The Laffan refinery is crucial for processing condensate into refined products, including aviation fuel.
Ras Laffan, situated 80 km (50 miles) north of Doha, serves as a central hub for the energy industry and hosts several international companies, including Shell, the largest LNG trader globally. A spokesperson for Shell confirmed that the company is currently assessing any potential impacts from the recent attacks.
The Iranian strikes occurred shortly after Tehran issued evacuation warnings for several oil facilities across Saudi Arabia, the UAE, and Qatar, following strikes on its energy infrastructure in South Pars and Asaluyeh.
U.S. President Donald Trump previously warned Iran via social media against further retaliatory strikes on Qatari LNG facilities, threatening to “massively blow up the entirety of the South Pars Gas Field” if such actions were taken. He also stated that Israel had attacked South Pars without prior notification to Qatar or the United States.
Gas Facilities Shut Down in UAE
In the UAE, authorities responded to incidents at the Habshan gas facilities and the Bab oil field, which were affected by debris from intercepted missiles. The gas facilities were shut down, but no injuries were reported, according to the Abu Dhabi Media Office.
The Habshan complex, operated by Abu Dhabi state oil giant ADNOC, is among the largest gas processing facilities globally, with a total capacity of 6.1 billion standard cubic feet per day.
According to publicly available www.zawya.com reporting.
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