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Qatar shut down liquefied natural gas production after Iran targeted its facilities with drone strikes, in the biggest disruption to energy supplies yet from the widening conflict in the Middle East.
The stoppage by QatarEnergy, one of the world’s largest energy suppliers, sent natural gas prices in Europe and Asia soaring by more than 30 per cent, while oil prices rose about 8 per cent due to a near complete halt of shipments through the Strait of Hormuz.
Saudi Arabia, the world’s largest oil producer, also said it had paused production at an oil refinery after a drone attack.
Traders and analysts warned that the multiple attacks raised the spectre of a prolonged energy price shock as Tehran took aim at infrastructure across the Gulf, while the conflict spread to additional countries including Lebanon and Cyprus.
“Gulf energy infrastructure is now squarely in Iran’s sights,” said Torbjorn Soltvedt, principal Middle East analyst at risk intelligence company Verisk Maplecroft.
In the first trading session since the initial US and Israeli strikes against Iran on Saturday, European gas prices surged as much as 30 per cent as fears over disruption to LNG exports from Qatar — one of the world’s largest producers and a key supplier to China — intensified.
US natural gas prices, which are more insulated from global disruption because of the country’s domestic production, rose 5 per cent.
Brent crude, the international benchmark, soared as much as 13 per cent before falling back to trade up 8 per cent — still its steepest daily rise in nearly three years.
Monday’s Iranian assault on the Saudi facility Ras Tanura, which was previously targeted by Houthi militants in 2021, is the first attack on an energy plant since the conflict began.
“It’s a huge escalation,” said Ali Shihabi, a Saudi commentator close to the royal court. “Saudi Arabia, which wanted to stay out of the war, will have to decide how to respond.”
Ras Tanura, the largest oil refinery in the Gulf coast, can process 500,000 barrels of crude a day. No one was injured in the attack and the shutdown of the refinery was precautionary, according to one person close to the situation.
Qatar’s defence ministry said Iranian drones had attacked the LNG facility in Ras Laffan, adding that it would assess the damage.
In a sign of investors’ fears over the deepening conflict, the gold price rose and global stocks fell, with the Stoxx Europe 600, Europe’s benchmark index, down 1.3 per cent, led by declines in airlines and hotel groups.
Futures tracking the S&P 500 indicated the index would drop 1 per cent when Wall Street opens. Those tracking the tech-heavy Nasdaq index were down 1.4 per cent.
The turmoil in energy markets came as the war entered its third day, with hostilities escalating across the region. US-Israeli strikes on Iran continued, while Israel began targeting Hizbollah across Lebanon.
Oil and LNG tankers waited at the mouth of the Strait of Hormuz, the narrow waterway at the mouth of the Gulf through which a fifth of the world’s oil and gas flows.
Shipping through the strait has slowed to a standstill after insurers began withdrawing coverage and a number of vessels were attacked on Sunday, including a tanker chartered by oil company Saudi Aramco that was carrying 500,000 barrels of gasoline.
Oil tanker rates from the Middle East to Asia have soared. Analysts at Argus said two deals had been agreed on Monday, one at roughly twice the last agreed rate on Friday, and one at three times, which equated to a freight cost of roughly $15 a barrel.
“The implications of this conflict for the world economy depend on the flow of oil and gas through the Strait of Hormuz,” said Norbert Rücker, head of economics at Julius Baer. “The most feared scenario is not its closure, but serious damage to the region’s key oil and gas infrastructure.”
Analysts at Morgan Stanley said a significant amount of crude already outside the Gulf could ease tightness in the oil market.
Martijn Rats, an analyst at the bank, said Saudi Arabia had raised exports by an additional 1.5mn barrels a day so far this year, and calculated that the kingdom could sustainably pipe 7mn b/d to its terminal on the Red Sea, bypassing the Strait of Hormuz.
China had also stockpiled close to 1mn b/d of crude over the past six months to weather any disruption.
In European markets, International Airlines Group, the owner of British Airways, was down 5 per cent, while Air France-KLM dropped 8.4 per cent. French hotel chain Accor weakened 8.7 per cent.
Gold was up 2.2 per cent to $5,390 a troy ounce, as investors sought haven assets, while the dollar rose 0.7 per cent against a basket of other major currencies.
Additional reporting by Andrew England in London