Oil and gas prices jump after Iran and Israel attack gasfields | Oil

Gas prices rose to four-year highs and oil prices rose again after increased attacks on natural gas fields by Israel and Iran raised fears of prolonged disruption to international energy supplies.

On Thursday, QatarEnergy told Reuters that Iran had damaged the state-owned company’s facilities, which produce 17% of its liquefied natural gas (LNG) export capacity, and that it would take three to five years to repair them.

Brent crude oil, the global oil reference, rose 8% to $116 per barrel. Crude oil prices have increased by 60 percent since February 28, when the US-Israeli war against Iran began.

European gas prices rose; The Dutch wholesale gas price increased by 24% to 68 Euros per megawatt hour; this was the highest level since the end of December 2022. It has more than doubled since before the war.

Gas prices in the UK have also more than doubled since the end of February and are likely to increase household bills too. The UK wholesale gas price next month rose 23% to 172 pence per therm on Thursday morning, reaching its highest level since August 2022. Prices still remain well below the peak of 800 pence per therm hit briefly in March 2022.

Traders are responding to the escalation in the Middle East, where Israel has stepped up attacks on Tehran’s energy facilities in response to Iran’s attack on the South Pars gas field, causing significant damage to the world’s largest LNG facility, Ras Laffan, in Qatar.

The escalation of the war and its impact on oil and gas prices triggered sharp sales in the stock markets. Japan’s Nikkei index fell 3.4 percent, South Korea’s Kospi index fell 2.7 percent and Hong Kong’s Hang Seng index fell 2 percent. European markets followed Asia. Britain’s FTSE 100 index fell almost 3% in the afternoon, while Germany’s Dax and France’s CAC index were down 2.3% and 2.2% respectively. Wall Street also opened with a decline.

Donald Trump has threatened to completely blow up South Pars if Iran attacks Qatar again. Israel’s decision to target the Iranian gas field was a serious escalation of the war.

QatarEnergy said Ras Laffan in Qatar suffered “major damage” after Iranian attacks.

Attacks on Qatar’s LNG hub have fundamentally changed the outlook for the global gas market, energy consultancy Wood Mackenzie said, with initial expectations of a two-month outage at the facility now likely to be exceeded. Each additional month of outage eliminates approximately 1.5% of annual global LNG availability.

Energy company Shell said the attack on Ras Laffan damaged its Pearl GTL (gas-to-liquids) plant. Shell added that the fire was quickly extinguished, no injuries were reported and Pearl was now in a “safe situation” after Iran attacked the facility in retaliation for an attack on the South Pars gas field.

Officials in Abu Dhabi said they had to stop activities at the Habshan gas facility and Bab oil field due to Iranian attacks.

Susannah Streeter, chief investment strategist at broker Wealth Club, said: “Fears of a sustained energy shock have resurfaced after oil and gas prices soared with the escalation of the Iran war. The prospect of a longer, more protracted conflict is coming into sharp focus as both sides step up attacks on energy infrastructure.”

“Warnings that oil could reach $150 per barrel have resurfaced. Israel’s attack on Iran’s gas fields led to retaliatory attacks on facilities in Qatar. As countries get rid of dependence on Russia, Europe in particular relies on LNG exports from Qatar.”

Streeter added: “Not only is the conflict extremely damaging to economies in the region, with tourism and business activity taking a hit, but the knock-on effects of higher energy prices will have toxic repercussions around the world.”

Major European airlines, including Lufthansa, said on Thursday that fares would increase if the increase in fuel prices continues for months. They urged travelers to book early as the industry’s fuel hedging strategies begin to unwind.

Thomas Pugh, chief economist at consultancy RSM UK, said higher energy prices could cause a second round of inflationary effects, leading to higher wage and price setting. If energy prices were still this high over the summer, he said, these second-round effects “could realistically push inflation towards 5%. At this point rate hikes by the Bank of England become much more likely.”

Instead of a rate cut, money markets are now fully pricing in a quarter point increase by July, which would take the Bank rate back to 4%.

Richard Meade, editor-in-chief of Lloyd’s List Intelligence, said Israel’s first confirmed attack on an operational gas field marked a significant change. “This increase broadens the risk profile, meaning that the likelihood of attacks on the entire energy and logistics system of the Middle East Gulf has now increased significantly. This includes export terminals, offshore infrastructure, anchorages, port approaches and military installations,” he said.

Meade added that there is a huge risk accumulation not only for ships passing through the Strait of Hormuz.

He said anchored ships were not as safe as thought. Some governments, including China, India, Pakistan, Iraq and Malaysia, were in direct contact with Iran to negotiate safe passage. Meade added that the idea that approval through payments or national membership guarantees safe passage “must be treated with extreme caution.”