Gas prices rose on Monday and oil rose sharply as an escalation in the US-Israel war against Iran caused major disruptions to production and supply.
QatarEnergy, the state energy company, said it had stopped production of liquefied natural gas (LNG) after attacks on facilities in Ras Laffan and Mesaieed.
A drone attacked its energy facilities in Ras Laffan, according to a statement from the Qatari Ministry of Defense. There were no reports of human casualties, he said.
The company, one of the world’s largest LNG producers, said in a statement on social media that it “values its relationships with all of its stakeholders and will continue to communicate the latest information available.”
The Dutch daily gas contract – the European benchmark – jumped 41% to 45 euros per megawatt hour (MWh), up from 32 euros on Friday.
The closure of the world’s largest export facility could result in the loss of almost 20% of global LNG supply, at a time when the market is still feeling the effect of the energy crisis in 2022.
While Qatar accounted for 1.9% of natural gas imports to the UK in 2024, the closure threatens to push more exposed Asian buyers into competition with Europe and drive up prices across the market.
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit, said the price rise “is a worrying sign that bills for both households and businesses could rise again” in the UK.
The turmoil in the Middle East also caused oil prices to rise sharply. Brent crude jumped as much as 13% in early trading – hitting a 14-month high of $82 a barrel – as the effective closure of the Strait of Hormuz, one of the most important arteries for global trade, intensified concerns about oil supply.
While oil retreated slightly from its early highs, Brent remained up nearly 8% at $79 a barrel on Monday.
Stock markets fell across Europe, with London’s FTSE 100 falling 1.3% to 10,771 points. IAG, the parent company of British Airways, and easyJet were among the worst performers, with thousands of flights cancelled, 5% and 4% respectively.
However, the rise in the price of crude oil pushed up shares of oil companies BP and Shell, about 3% and 2% respectively. Shares of weapons maker BAE Systems rose 5% as investors poured into defense stocks.
Other European stock markets fell on Monday: the German Dax index fell 2.5%, the French CAC 40 2.3%, the Italian FTSE MIB 2.2% and the Spanish Ibex 3.1%. Wall Street also opened lower, although the Dow Jones, S&P 500 and Nasdaq fell less than 1%.
In Tokyo, the Nikkei 225 fell nearly 2.4% as Asian traders responded to events over the weekend. It subsequently fell, to trade with a drop of 1.4%.
In Sydney, the ASX 200 opened sharply, before recovering, to end the day unchanged. China’s Shenzhen Composite fell 0.7%.
Gold, which investors typically consider a safe asset in times of crisis, rose 2.5% to $5,408 an ounce.
US and Israeli military strikes against Iran showed no signs of abating, with Donald Trump suggesting the conflict could last four more weeks and saying strikes would continue until US objectives were met.
As prices rose, all eyes were on the Strait of Hormuz, through which about a fifth of oil supplies and gas tankers pass.
Just hours after Saturday’s US-Israeli attacks, Tehran reportedly warned oil tankers in the strait that no ships would be allowed through.
Two ships have been attacked in the strait, one off Oman and the other off the United Arab Emirates, 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, maritime monitoring sites showed oil tankers piling up on both sides of the strait, fearful of attack or perhaps unable to obtain insurance for the journey.
The International Maritime Organization urged ships to avoid the Strait of Hormuz. Arsenio Domínguez, its secretary general, expressed deep concern over reports that several sailors had been injured in attacks.
“I urge all shipping companies to exercise utmost caution,” Dominguez said. “Wherever possible, ships should avoid transiting the affected region until conditions improve.”
Maersk, the multinational shipping company, announced on Sunday that it would suspend passage through the Strait of Hormuz and the Suez Canal, another vital artery of the world economy, citing security reasons.
Some analysts suggested oil prices could surpass $100 a barrel unless flows through the Strait of Hormuz were quickly restored.
The cartel of producing nations OPEC+ agreed on Sunday to a modest increase in oil production of 206,000 barrels per day by April, but much of that product still has to leave the Middle East in tankers.
Iran is one of the cartel’s largest producers, producing 4.5% of global supplies, so any disruption to its own shipments will likely have an impact on the broader market.
“The disruption creates a double supply shock: not only are current exports across the strait halted, but additional OPEC+ volumes and ultimately most of OPEC’s spare capacity – typically a key lever in balancing the global oil market – are inaccessible while the waterway remains closed,” analysts at energy consultancy Wood Mackenzie said in a note.
In the UK, according to the RAC, petrol station prices have already increased in recent weeks, but could rise further due to the conflict.
The RAC’s Simon Williams said: “Regardless of the current situation, petrol rose by a penny a liter in February and is likely to rise another penny in the coming week to an average of 134p a litre.
“If oil were to rise 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 liter and $100 would put us closer to 150p, but it’s too early to tell.”
Reuters and AFP contributed to this report.
