Gas prices surged on Monday and oil rose sharply as an escalation in the US-Israel war on Iran caused major disruption to production and supplies.
QatarEnergy, the state-owned energy company, said it had halted production of liquefied natural gas (LNG) after attacks on facilities in Ras Laffan and Mesaieed.
A drone attacked its energy facility in Ras Laffan, according to a statement from Qatar’s defence ministry. There were no reports of human casualties, it said.
The company, which is one of the biggest producers of LNG in the world, said in a statement on social media that it “values its relationships with all of its stakeholders and will continue to communicate the latest available information”.
The Dutch day-ahead gas contract – the European benchmark – jumped 41% to €45 per megawatt hour (MWh), up from €32 on Friday. The day-ahead contract for gas in the UK was also up sharply by 40% at 110p a therm.
The shutdown at the world’s biggest export facility could result in the loss of almost 20% of the global LNG supply, at a time when the market is still feeling the effect of the energy crisis in 2022.
While Qatar supplied about 6.5% of UK LNG imports over the past year, according to the energy analyst Cornwall Insight, the shutdown threatens to push more heavily exposed Asian buyers into competition with Europe and ramp up prices across the market.
Jess Ralston, the head of energy at the Energy and Climate Intelligence Unit, said the price spike “is a worrying sign that bills for both homes and businesses could rise again” in the UK.
The turmoil in the Middle East also triggered a sharp rise in oil prices. Brent crude jumped by as much as 13% during early trading – to hit $82 a barrel, a 14-month high – as the effective closure of the strait of Hormuz, one of the most important arteries for global trade, intensified concerns over oil supplies.
Gas prices chart
While oil later fell back slightly from its initial highs, Brent remained up by nearly 6% at $77 a barrel on Monday.
Stock markets fell across Europe, with London’s FTSE 100 down 1.2% at 10,780 points. IAG, the parent company of British Airways, and easyJet were among the worst performers, as thousands of flights were cancelled, down 6% and 4% respectively.
However, the rise in the crude price pushed up shares in the oil companies BP and Shell, by about 3%. Shares in the weapons manufacturer BAE Systems jumped by 5% as investors piled into defence stocks.
Other European stock markets fell on Monday, with the German Dax index down by 2.4%, the French CAC 40 down 2.2%, the Italian FTSE MIB down 2% and the Spanish Ibex down 2.6%. Wall Street also opened lower.
Oil prices chart
In Tokyo, the Nikkei 225 fell by nearly 2.4% as traders in Asia responded to the weekend’s developments. It later pulled back, to trade down 1.4%.
In Sydney, the ASX 200 opened down sharply, before recovering, to finish the day flat. China’s Shenzhen Composite fell 0.7%.
Gold, often deemed a safe-haven asset by investors during times of crisis, rose 2.5% to $5,408 an ounce.
Military strikes by the US and Israel on Iran showed no sign of lessening, with Donald Trump suggesting the conflict could last for four more weeks and saying that attacks would continue until America’s objectives were met.
As prices rallied, all eyes were on the strait of Hormuz – with about a fifth of oil supplies and seaborne gas tankers passing through it.
Within hours of Saturday’s US-Israeli strikes, Tehran had reportedly warned tankers in the strait that no ship would be allowed to pass through.
Two ships have been attacked in the strait, one off Oman and the other off the UAE, according to United Kingdom Maritime Trade Operations (UKMTO), the British maritime security agency.
While Iran has yet to officially confirm that the vital waterway has been blocked, marine tracking sites showed tankers piling up on either side of the strait wary of attack or maybe unable to get insurance for the voyage.
The International Maritime Organization urged ships to avoid the strait of Hormuz. Arsenio Dominguez, its secretary general, expressed deep concern over reports that several seafarers had been wounded in attacks.
“I urge all shipping companies to exercise maximum caution,” Dominguez said. “Where possible, vessels should avoid transiting the affected region until conditions improve.”
A map showing the strait of Hormuz
Maersk, the shipping multinational, announced on Sunday it was halting passage through the strait of Hormuz and the Suez canal, another vital artery of the world economy, citing safety reasons.
Some analysts suggested oil prices could exceed $100 a barrel unless flows through the strait of Hormuz were quickly restored.
The Opec+ cartel of producing nations agreed on Sunday a modest oil output boost of 206,000 barrels a day for April, but a lot of that product still has to get out of the Middle East by tanker.
Iran is one of the cartel’s largest producers, pumping 4.5% of global supplies, so any disruption to its own shipments is likely to have an impact on the wider market.
“The disruption creates a dual supply shock: not only are current exports through the strait halted, but Opec+ additional volumes and ultimately most of Opec’s spare capacity – typically a key lever for balancing the global oil market – are inaccessible while the waterway remains closed,” analysts at the energy consultancy Wood Mackenzie said in a note.
In the UK, according to the RAC, forecourt prices were already rising in recent weeks but could climb further because of the conflict.
The RAC’s Simon Williams said: “Regardless of the current situation, petrol rose by a penny a litre in February and is likely to go up by another penny in the next week or so to an average of 134p a litre.
“If oil were to climb to and stay at the $80 a barrel mark, then drivers could expect to pay an average of 136p for petrol. At $90, we’d be looking at over 140p a litre and $100 would take us nearer to 150p, but it’s all too soon to know.”
Reuters and AFP contributed to this report
