(March 19): The price of oil and natural gas jumped on Thursday as escalating attacks in the Persian Gulf threatened long-term damage to major energy facilities.
European gas futures surged as much as 35% to more than double their pre-war level and Brent crude rose as high as US$117 ($150) a barrel.
An Iranian missile inflicted “extensive damage” on a Qatari complex housing the world’s largest liquefied natural gas (LNG) plant. Also, a gas facility in Abu Dhabi was shut after being hit by falling debris from an intercepted strike and two oil refineries in Kuwait were set ablaze by drone attacks. Saudi Arabia was assessing damage after a drone fell on a refinery near the Red Sea.
The attack on Qatar raises the spectre of higher long-term energy prices resulting from the US and Israel’s war on Iran. While oil and gas flows through the Strait of Hormuz could resume once the conflict ends, any badly damaged production facilities in the region could take much longer to recover.
“LNG from Qatar could in principle be offline for months and, in the worst case, for years,” said Arne Lohmann Rasmussen, the chief analyst of Global Risk Management. “For the gas market, the crisis does not end simply because the war ends and the Strait of Hormuz reopens.”
US President Donald Trump responded by pressing for a de-escalation. He said Israel would refrain from further strikes on Iran’s South Pars gas field — the attack that prompted Tehran’s retaliation against Qatar. However, the president also said that the US would “massively blow up the entirety” of South Pars if Iran targets Qatar’s LNG facilities again.
See also: European gas jumps 35% after world’s top LNG plant hit by Iran
QatarEnergy said several of the LNG facilities inside its Ras Laffan Industrial City were attacked by missiles, “causing sizeable fires and extensive further damage”. While shipments from the LNG plant had already been halted earlier this month due to the war, the latest strikes threatened a longer-lasting supply disruption.
Full details of the extent of the damage and the timeline for repairs aren’t yet known. While Asian countries buy most of the LNG shipped from the Middle East, any prolonged disruption to flows would shrink the global supply balance — keeping prices elevated worldwide. Natural gas futures in the US, also a major exporter of LNG, rose as much as 6.5% on Thursday.
See also: US sells the most oil to Asia in three years as Iran war blocks supply from Mideast — Bloomberg
Shell plc’s Pearl gas-to-liquids plant also sustained damage, the company said. A fire has been extinguished and the facility is in a “safe state”, according to a statement. Essential staff are safe and the extent of the damage is being assessed.
“A retaliatory attack on Ras Laffan is exactly what the global natural gas market feared the most,” said Tom Marzec-Manser, a Europe gas and LNG director at consultancy Wood Mackenzie Ltd. “We are yet to know which part of the industrial complex has been damaged, but either way it’s going to be bullish.”
Abu Dhabi shut the Habshan gas facilities after the interception of missiles targeting the plant and an oilfield resulted in falling debris. No injuries were reported, the Abu Dhabi Media Office said in a post on X.
Refinery strikes
In Kuwait, two oil refineries were struck by drones. A limited fire at an operational unit of the 346,000 barrel-a-day Mina Al-Ahmadi oil refinery has now been extinguished, as has a blaze at the 454,000 barrel-a-day Mina Abdullah refinery, according to state-owned Kuwait Petroleum Corp and its refining arm Kuwait National Petroleum Co.
Thursday’s attack on Saudi Arabia’s Samref refinery marked the first time in this war that a facility on the country’s west coast has been targeted by Iran. State oil giant Aramco has been rushing to pump crude oil from its fields on the Persian Gulf in the east to the western Red Sea, bypassing the closure of Hormuz. Samref is one of the plants the company is relying on to provide fuels like diesel to buyers in Europe.
Oil has surged about 60% since the start of the war. More intensive targeting of upstream energy infrastructure, either in Iran or across the wider region, threatens a longer-term impact on oil prices.
“The market is still underestimating and not fully pricing the risk of how quickly this could escalate,” said Haris Khurshid, the chief investment officer of Karobaar Capital LP in Chicago. “If this escalates into direct hits then US$120 won’t be the ceiling, it will be the starting point.”
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