Qatar has halted the production of liquefied natural gas (LNG) at the world’s largest export facility after it was targeted in an Iranian drone attack, triggering a sharp spike in European gas prices and sending shockwaves through global energy markets.
According to a Bloomberg report, European gas prices surged more than 50% following the shutdown as traders scrambled to price in the potential loss of supply from of the world’s most critical energy hubs.
The unprecedented closure also marks a dramatic escalation in a conflict that now threatens energy security worldwide. It all began on Saturday, 28 February, when the US and Israel launched a joint strike on Iran. In response, Tehran targeted Israel and US assets in Gulf states.
European benchmark gas futures jumped the most in nearly four years, after QatarEnergy confirmed on Monday that production had been suspended. Tankers had already largely stopped sailing through the Strait of Hormuz, the news agency said.
Meanwhile, Dutch front-month futures, Europe’s gas benchmark, gained 45% at €46.19 (54.03) a megawatt-hour by 2:17 PM in Amsterdam.
How big is the gas export facility?
QatarEnergy’s Ras Laffan plant exports about a fifth of the world’s total LNG supply. Since it dominates the gas market, the plant’s closure may be the biggest shock to gas markets since Russia’s invasion of Ukraine four years ago upended global energy trade, Bloomberg said.
While Asian countries purchase most of the LNG shipped from the Middle East, any disruption would increase competition for alternative supplies, leading to gas becoming more expensive worldwide, including in Europe.
Why is the Strait of Hormuz crucial?
The Strait of Hormuz, one of the world’s most important shipping routes for energy, carries about a fifth of the world’s liquefied natural gas exports. With traffic through the waterway slowing sharply due to risks, vessels are facing delays or rerouting, creating significant congestion.
Over half of the world’s largest maritime insurance clubs will stop providing war-risk cover for vessels entering the Persian Gulf starting from Thursday, Bloomberg reported, a move likely to deter cargo loadings in the region.
On top of that, Israel on Saturday ordered the temporary closure of some gas-producing capacities, including its biggest Leviathan gas field. That prompted major importer Egypt to seek more LNG cargoes, the agency reported.
US-Iran war continues to escalate
The conflict continues to escalate between all the parties involved, with blasts heard across Israel, Saudi Arabia, Qatar and the United Arab Emirates, according to Bloomberg.
The states intercepted Iranian missiles launched in response to US-Israeli strikes. The situation may not end anytime soon, as the US President Donald Trump said the bombing campaign against Iran could last for weeks.
Some countries and bodies have expressed concern over the escalating conflicts globally. In one such instance, Oman’s foreign minister, who has been mediating US-Iran negotiations, called for a ceasefire during a Sunday call with his Iranian counterpart and said Tehran has expressed its willingness to de-escalate, according to a Hindustan Times report.
Meanwhile, United Nations Secretary-General Antonio Guterres called for an immediate halt to hostilities and urgent de-escalation in West Asia, urging world leaders to “act responsibly”, ANI reported.
