Wholesale gas prices in the UK and Europe surged by around 25% in early trading on Thursday before easing slightly, with UK gas currently trading near 175p per therm. In Europe, gas prices are now more than double levels seen before the escalation of the US-Israeli conflict with Iran.
Oil markets were also rattled. Brent crude jumped roughly 10% to over $119 a barrel at one point, before easing, as traders reacted to the potential for longer-term supply shortages.
The spike comes after Iran’s South Pars gas facility — one of the largest natural gas fields in the world — was struck on Wednesday evening. Iran retaliated by targeting Qatar’s Ras Laffan liquefied natural gas (LNG) facility, reportedly causing “extensive damage.” The facility produces roughly a fifth of the world’s LNG, making the attacks particularly significant for global energy markets.
Reports indicate that the strikes in Qatar followed Israeli attacks on Iran’s petrochemical complex at the South Pars field, heightening tensions across the region.
The attacks triggered sharp market reactions. In Japan, the Nikkei index closed down 3.4%, while London’s FTSE 100 fell 1.7% Thursday morning, reflecting investor anxiety over potential economic fallout.
Matthieu Favas, commodities editor at The Economist, described the surge in gas prices as “huge,” noting that the direct hit on Ras Laffan could keep the facility offline for months. “These facilities provide a fifth of global LNG supply, which is why the market is pricing in long-lasting disruption,” he said, while adding that prices are still below the peaks seen after Russia’s invasion of Ukraine.
Iran’s military issued a statement warning of further retaliation against what it termed the “American-Zionist enemy” and suggested that it could target energy infrastructure in countries involved in the attacks.
Qatar, which calls its part of the gas field North Dome, had already paused production earlier this month amid rising tensions. The Ras Laffan facility was reportedly brought under initial control of fires on Wednesday evening, with no injuries reported, according to Qatar’s interior ministry.
Nick Butler, former BP strategy chief, told the BBC that the strike “will almost certainly cut off a level of LNG supply to the world market” and that the gas in Ras Laffan “can’t be substituted very quickly, if at all, which will push up prices.”
In response to rising oil costs, the White House announced a 60-day suspension of the Jones Act, which normally requires that only American-made ships transport goods between US ports. Officials said the waiver would allow essential commodities such as oil, natural gas, coal, and fertilizer to flow more freely, though industry groups warned the impact on prices at the pump would likely be minimal.
Meanwhile, Iran has halted gas exports to Iraq to safeguard domestic supplies, a senior Iraqi official confirmed. According to the Gas Exporting Countries Forum, 94% of Iran’s gas is used domestically, underscoring the potential regional impact of these disruptions.
The latest developments underscore the fragility of global energy markets and the risks posed by escalating geopolitical tensions in the Middle East.