European airlines warn surging energy prices will mean higher fares
Major European airlines warned of rising fares if the surge in fuel prices stemming from the Iran conflict persists for months, Reuters reports.
They have urged passengers to book early to avoid extra costs as the industry’s fuel hedging strategies – which they use to protect themselves from rising energy prices – start to unwind.
Lufthansa Group Carsten Spohr, speaking alongside other airline leaders in Brussels, said it had added 40 flights to Asia to compensate for disruption to Gulf carriers but demand could be affected by higher fuel charges and fares.
Brent crude is now up 10% so far today at $118.11 a barrel, as the renewed attacks on energy infrastructure in the Middle East alarm investors.
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Updated at 07.36 EDT
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Germany’s economy minister, Katherina Reiche, has warned that high energy prices could drive companies out of Europe’s biggest economy, as she expressed concern about the attacks on energy infrastructure in the Middle East.
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Losses across European markets
European stock markets are down across the board this morning.
Germany’s DAX has dropped by 2.3%, France’s CAC 40 is down 1.7% and Italy’s FTSE Mib and Spain’s IBEX have both lost 2.2%.
The UK’s FTSE 100 is little better – now down 1.9% at 10,109 points (-196 points today)
Raffi Boyadjian, lead market analyst at XM, says:
double quotation markThe brief spout of optimism earlier in the week has dissipated as the conflict in the Middle East shows no sign of easing, while the gatherings of the world’s most important central banks have shunned the spotlight on the fresh inflation threat facing the global economy.
The overriding trend of higher energy prices and tighter monetary policy is making its mark again on the markets, with risk assets crumbling and gold succumbing to the US dollar’s strength, as investors struggle to see an end to the war.
Israel struck Iran’s South Pars gas field on Wednesday, which is the world’s largest natural gas field, triggering an angry retaliation by Tehran. Qatar’s Ras Laffan Industrial City – the largest LNG plant in the world – came under attack again, prompting an intervention by the US President.
Posting on his Truth Social platform, Trump attempted to diffuse the situation by distancing the US from Israel’s actions, saying America was unaware of those plans and that “no more attacks will be made by Israel” on South Pars. However, he also warned Tehran that any new strikes on Qatar’s LNG facility would be met by a strong response.
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Updated at 06.51 EDT
Ryanair CEO Michael O’Leary has predicted today that European tourists are likely to travel closer to home to cut flight times and avoid flying long-haul over the Middle East.
He was speaking at a news conference in Brussels where airline CEOs called on the EU to postpone its mandates for the use of synthetic sustainable jet fuel (eSAF).
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RSM UK: Oil and gas price shock could push UK inflation to 5%
Today’s surge in oil and gas prices could push inflation up to 5%, if prices remain at these levels, predicts Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK.
He points out that higher energy prices could cause ‘second round effects’ (ie, leading to higher wage and price setting), saying:
double quotation mark“We’ve seen another surge in oil and gas prices this morning as attacks on energy infrastructure in the Middle East escalate the economic risks.
“If prices of around $117pb for oil and 173p/therm are maintained, higher energy prices would push to a little above 4% by the end of the year. However, that likely understates the total impact as second-round effects would become more likely and larger if energy prices were still this high into the summer, which could realistically push inflation towards 5%. At that point, interest rate hikes become much more likely.
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Updated at 06.34 EDT
Joumanna Nasr Bercetche of Bloomberg flags that China and India are the biggest buyers of Qatar’s LNG:
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Bank of England now expected to raise interest rates this year
City traders are betting that the energy crisis will force the Bank of England to raise UK interest rates this year.
The money markets are now fully pricing in a quarter-point raise by July, which would take Bank rate back up to 4%.
We’ll get a feeling for the Bank’s view of the situation at noon today, when it is expected to leave interest rates on hold.
Gary Smith, head of EMEA client portfolio manager team, fixed income at Columbia Threadneedle Investments, says:
double quotation markPrior to the conflict in the Middle East markets were primed to expect a March rate cut from the BoE, but this pricing has evaporated – and we agree that the BoE will likely stay on hold this week.
The Monetary Policy Committee will want to wait for more clarity on the potential inflationary impacts of rising energy costs – for now this overshadows any domestic political dynamics or economic data.
The Bank will need to judge the energy price shock as “persistent” in order to justify a monetary policy response and given the current highly uncertain nature of the geopolitical backdrop, it is unlikely that the Bank can determine the nature of the shock at this juncture – which leaves it in “wait and see” mode.
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European airlines warn surging energy prices will mean higher fares
Major European airlines warned of rising fares if the surge in fuel prices stemming from the Iran conflict persists for months, Reuters reports.
They have urged passengers to book early to avoid extra costs as the industry’s fuel hedging strategies – which they use to protect themselves from rising energy prices – start to unwind.
Lufthansa Group Carsten Spohr, speaking alongside other airline leaders in Brussels, said it had added 40 flights to Asia to compensate for disruption to Gulf carriers but demand could be affected by higher fuel charges and fares.
Brent crude is now up 10% so far today at $118.11 a barrel, as the renewed attacks on energy infrastructure in the Middle East alarm investors.
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Updated at 07.36 EDT
Greenpeace has responded to the attacks on gas infrastructure in the Persian Gulf, and the resulting spike in energy costs.
Maja Darlington, climate campaigner for Greenpeace UK, says:
double quotation mark“Last week we learned that one more big fossil fuel price shock like Ukraine would cost the UK more than the entire bill for getting to net zero.
The latest spike in gas prices makes Trump’s reckless, chaotic war look more and more like that price shock, and it won’t be the last one we experience if we stay hooked to fossil fuels. The UK has the resources to be self-sufficient in energy through renewables. Letting oil and gas stay in the mix means letting foreign wars control our energy bills.”
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Ras Laffan attacks “fundamentally reshape global LNG outlook”
Yesterday’s missile attacks on Qatar’s Ras Laffan Industrial City have “fundamentally” altered the global gas market outlook, energy consultancy Wood Mackenzie are warning this morning.
Wood Mackenzie are warning that initial expectations of a two-month disruption at the site are now likely to be exceeded.
An extended outage risks tightening global supply, raising prices, and delaying capacity growth through 2028, they warn.
Wood Mackenzie point out that Qatari LNG production has been halted since 2 March, which removed around 19% of global LNG supply from the market, or 80m tonnes per annum.
An expansion of its “North Field East” site, which would have added 32m tonnes per annum, now faces potential delays, Wood Mackenzie fear, which could “reshape supply growth expectations through 2027-2028.”
Before the attacks, Wood Mackenzie had forecast it would take four to six weeks to ramp up Qatari LNG production to full capacity.
Kristy Kramer, head of LNG strategy and market development atWood Mackenzie, warns:
double quotation mark“Market expectations had been for a short disruption, with a controlled restart restoring supply to pre-conflict levels by mid-2026. That outlook now appears increasingly unlikely.
“A more prolonged outage would further tighten the global supply and keep prices elevated for longer.”
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The Brent crude oil price is continuing to climb this morning.
It’s now up 8.8% today at $116.85 a barrel, approaching the three-and-a-half-year high of $119.50 set earlier this month.
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Shell says attack on Ras Laffan damaged Pearl GTL facility
Shell has confirmed that Wednesday’s attack on Qatar’s Ras Laffan Industrial City caused damage to the Pearl GTL (gas-to-liquids) facility.
Shell added the fire was quickly put out, there were no reported injuries and Pearl is now in a “safe state”, after Iran attacked the facility in retaliation for the attack on its South Pars gasfield.
Shell has a 100% interest in Pearl GTL in Qatar, which has capacity to process up to 1.6 billion cubic feet per day of wellhead gas, converting it into 140,000 bpd of gas-to-liquids, Reuters reports.
Sky News’s Ed Conway has warned that the attack on Ras Laffan could have serious consequences, potentially for years:
Very, very bad news.
As I wrote in Material World, Ras Laffan is one of the most important industrial sites not just in the Gulf but in the world. LNG, helium, other products. Massive.
Whatever happens next, serious damage to this site could reverberate for months, maybe years. https://t.co/72PGcL66IM
— Ed Conway (@EdConwaySky) March 18, 2026
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Interest rates on hold in Swizerland and Sweden despite energy shock
Two central banks just left interest rates on hold, even though the Middle East crisis is threatening to drive up inflation.
The Swiss National Bank has left its policy rate unchanged at 0%, and predicted that the rise in energy prices due to the escalation in the Middle East means inflation in Switzerland is likely to increase more strongly in the coming quarters.
The SNB warned traders it would intervene if necessary to keep the Swiss franc stable, saying:
double quotation markGiven the conflict in the Middle East, the SNB’s willingness to intervene in the foreign exchange market has increased. The SNB thereby counters a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland.
Sweden’s Riksbank has left its policy rate unchanged at 1.75%, cautioning that the war in the Middle East makes forecasting very uncertain.
The Riksbank said:
double quotation markRecent international developments have been very dramatic. The war in the Middle East has caused major movements in energy prices and in financial markets, including a rise in short-term market interest rates. The US dollar has strengthened, including against the Swedish krona. It is still unclear what the more long-term consequences will be, in both geopolitical and economic terms, and conditions can change rapidly.
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It’s a busy morning for BP as the crude prices surges higher.
The British energy major has announced the sale of its German oil refinery site in Gelsenkirchen to investment firm Klesch Group, and also raised its cost reduction target.
BP is now aiming for $6.5bn to $7.5bn of structural cost reductions by 2027, which equates to around 30 percent of bp’s 2023 cost baseline.
BP is also planning to shift its global headquarters to new offices in London by early 2028.
The new site – in London’s Southwark – will also house technical and engineering staff currently based in its Sunbury campus, to the west of the capital.
BP told Reuters in a statement:
double quotation mark“We are taking steps to build a simpler, stronger and more valuable bp, including bringing our teams and leaders closer together. This move will help us work smarter and faster, strengthen decision-making, and create more opportunities for meaningful in-person collaboration.”
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