Energy markets rocked by Middle East escalation
Gas prices jumped about 25% on wholesale markets in the UK and Europe in early trading Thursday after Iran targeted Qatar's Ras Laffan liquefied natural gas export facility, one of the world's largest. The strike followed reports that Israel hit Iran's petrochemical complex on the South Pars gas field Wednesday evening. UK gas prices climbed to around 175p per therm, more than double the level seen before recent escalation in the region.
Matthieu Favas, commodities editor at The Economist, told the BBC that the rise was "huge" because the attack on Ras Laffan, which provides a fifth of the global supply of liquid natural gas, "makes it clear that this is unlikely" to restart within weeks. "This could last months," he said, explaining why markets were pricing in long-lasting disruption.
Oil markets follow suit
Brent crude jumped 10% to nearly $119 a barrel at one point Thursday morning before slipping to $114. The strikes rattled stock markets as investors grew concerned about prolonged conflict. In Japan, the Nikkei share index closed down 3.4%, and in London the FTSE 100 was down 1.8% on Thursday morning.
Nick Butler, former head of strategy at BP, said the strike on Ras Laffan "will almost certainly cut off a level of supply of LNG to the world market." He warned that the gas "can't be substituted very quickly at all, and maybe not for a very long time," which will push up prices further.
Iran's retaliation and warning
Iran's military stated it had warned of "decisive action" in response to the strike on its energy infrastructure. In a statement published by Tasnim, an Islamic Revolutionary Guard Corps-affiliated news agency, the military said: "We consider targeting the fuel, energy, and gas infrastructures of the countries of origin legitimate and will retaliate strongly at the earliest opportunity."
Ras Laffan was among sites Iran listed as possible targets following the attack on South Pars. Qatar's interior ministry said at 19:00 GMT Wednesday that it had "initially brought the fire in Ras Laffan under control, with no injuries reported."
US government response
The White House suspended the Jones Act, a 1920 law restricting cargo transport between US ports to American-made ships, for 60 days. US Press Secretary Karoline Leavitt said the waiver would allow "vital resources like oil, natural gas, fertiliser, and coal to flow freely" using non-American vessels.
Maritime groups in the US said the effect would be minimal, noting that oil prices rather than shipping costs drive pump prices. Experts added that earlier efforts by world leaders, including an unprecedented release of oil reserves, had done little to reduce oil prices.
Broader supply pressures
Iran suspended the flow of gas to Iraq to shore up domestic supplies, a senior Iraqi official told Reuters. The vast majority of Iran's gas supply—94%—is used domestically, according to data from the Gas Exporting Countries Forum. Consumers worldwide face months of elevated energy costs if the Ras Laffan facility remains offline.
