PARIS, France, March 21: Attacks on energy infrastructure this week has sent oil and gas prices soaring as they raise the spectre of the conflict morphing into an energy war that will have more painful consequences for the global economy.
- What's happened? -
Following an Israeli strike on Iran's South Pars gas field, Tehran vowed to strike energy facilities throughout the Gulf in retaliation.
It attacked Qatar's Ras Laffan LNG facility -- the largest in the world -- on Thursday.
State-run QatarEnergy said two waves of Iranian strikes had caused "sizeable fires and extensive further damage" to several LNG facilities.
Strike also hit Saudi Arabia's Red Sea refinery -- located at the end of a pipeline that bypasses the Strait of Hormuz -- and two Kuwaiti oil refineries.
- What are the concerns? -
Iran has de facto closed the Strait of Hormuz, through which a fifth of pre-conflict global crude oil and liquefied natural gas travelled.
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That sent prices rocketing higher, but this was in essence a transport problem that could be rapidly corrected once hostilities are brought under control or ended.
But the attacks indicate that the conflict is shifting towards an energy war where damage to and destruction of infrastructure leads to a longer supply crisis that would be much more damaging to the global economy.
"The war has now clearly entered a phase where energy infrastructure is being directly targeted," Arne Lohmann Rasmussen, chief analyst at Global Risk Management.
"This marks a new escalation and points to further upside pressure on energy prices in the coming days," he added.
John Plassard, head of investment strategy at Cité Gestion Private Bank, said the attacks evoke a "shift towards total energy war".
What consequences?
The latest attacks were quickly felt on global energy markets.
Brent crude shot up more than 10 percent at one point to over $119 a barrel, before pairing gains.
European gas prices jumped by 35 percent before settling around 70 euros per megawatt hour, a gain of 28 percent.
That will in turn impact electricity prices, which in Europe are largely determined by gas prices.
"Market expectations had been for a short disruption, with a controlled restart restoring supply to pre-conflict levels by mid-2026," said Kristy Kramer, Head of LNG Strategy and Market Development at research firm Wood Mackenzie.
"That outlook now appears increasingly unlikely," she added.
Meanwhile analysts at EnergyScan said: "We are not yet in the worst-case scenario we described in our last monthly report, but we are getting closer."
- Supply disruptions -
Analysts at Rystad Energy noted that Iran's attacks have targeted sites that account for 20 percent of global seaborne LNG trade.
"A successful strike would not only disrupt condensate refining but threaten the operational continuity of LNG trains supplying Europe, Japan, South Korea and China under long-term contracts," they warned.
"The breadth of what is at risk here in fuels, chemicals, LNG and fertilizer inputs is what makes this moment qualitatively different from previous episodes of Gulf tension," they added.
Seb Kennedy at Energy Flux said "the idea that Qatari LNG volumes will return to pre-war levels this year is rapidly becoming a fantasy."
He noted that the market was also counting on Qatar's mega-expansion reshaping global LNG supply in the coming years.
"That programme now faces the real possibility of permanent derailment as energy flows recalibrate away from the Hormuz chokepoint," said Kennedy.
"The geopolitical architecture that made Qatar the cornerstone of global LNG supply is being dismantled in real time."
