By Jaidaa Taha, Yousef Saba, Jana Choukeir and Yomna Ehab March 19 (Reuters) - European gas prices surged 25% and oil gained 10% on Thursday after Iran attacked energy infrastructure in the Middle
Natural gas prices soar as doomsday scenario unfolds; Iran, Israel strike infrastructure
Middle East Conflict Sparks Global Energy Crisis
By Maha El Dahan, Andrew Mills and Yousef Saba
Natural Gas Infrastructure Under Attack
March 19 (Reuters) - Natural gas prices in Europe surged as much as 35% on Thursday as Iranian and Israeli strikes targeted some of the Middle East's most important gas infrastructure, doing damage that will likely take years to repair.
The strikes on energy facilities since the onset of the U.S. and Israeli war on Iran have brought to life some of the energy industry's worst fears - that a conflict in the region will leave long-term damage and shortages in global energy supplies.
Expert Analysis: Doomsday Scenario Unfolds
"We are now well on the road to the doomsday gas-crisis scenario," said Saul Kavonic, an energy analyst at MST Financial. "Even once the war ends, the disruption to LNG supply could last for months or even years."
Key Facilities Targeted
Iran on Thursday struck the Ras Laffan liquefied natural gas facility in Qatar, the world’s largest LNG complex, a day after Israel attacked Iran's huge South Pars gas facilities.
The hit on Ras Laffan destroyed two LNG trains that could cause a reduction of around 17% of Qatar's liquefied natural gas exports for between three and five years.
"I never in my wildest dreams would have thought that Qatar would be - Qatar and the region - in such an attack, especially from a brotherly Muslim country in the month of Ramadan, attacking us in this way," QatarEnergy CEO Saad al-Kaabi told Reuters.
He said the state-owned gas company may have to declare force majeure on long-term contracts to Belgium, China, Italy and South Korea.
Gas prices in Europe rose by as much as 35% on Thursday and oil jumped as much as 10%, before paring gains.
Escalation and Market Impact
Sharp Escalation in the Conflict
SHARP ESCALATION IN THE CONFLICT
Analysts say Israel's attack on South Pars and the retaliatory strike on the Ras Laffan plant represent a sharp escalation in the conflict.
Aerial attacks by Iran have already targeted a refinery in Saudi Arabia, forced the United Arab Emirates to shut gas facilities, and started fires at two Kuwaiti refineries. U.S. President Donald Trump threatened retaliation if they persisted.
Market Reactions and Global Risks
"This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines or Strait of Hormuz closure," said Charu Chanana, chief investment strategist at Saxo in Singapore, referring to the closure of a key waterway bordering Iran's coast through which a fifth of the world's crude oil and liquefied natural gas normally flows.
"It is now hitting the plumbing of the global energy system. What is unsettling markets now is the growing stagflation risk," she added.
Economic Fallout and Inflation
Euro Zone Inflation Expected to Rise
EURO ZONE INFLATION EXPECTED TO RISE
The European Central Bank said on Thursday the war in Iran would have a "material impact" on near-term inflation, depending on its intensity and duration.
Financial markets expect euro zone inflation to climb close to 4% over the next year, then take years to return to the ECB's 2% target.
Traders are pricing in two or three rate hikes by December, betting that the ECB would not tolerate another war-fuelled spike in inflation after being stung by Russia's invasion of Ukraine four years ago.
The yield on the 2-year U.S. Treasury note, a proxy for expectations of where the Federal Reserve is headed with interest rates, shot to the highest in nearly eight months, unwinding most of the three rate cuts the Fed delivered last year.
An International Monetary Fund official on Thursday estimated that every 10% increase in oil prices, if sustained through the year-end, adds about 40 basis points to global inflation and cuts economic output by 0.1% to 0.2%.
Britain, France, Germany, Italy, Japan and the Netherlands called for an immediate moratorium on attacks on oil and gas facilities and said they are working with energy-producing nations to stabilise markets, according to a joint statement.
Political Responses and Future Risks
International Warnings and Threats
Trump earlier warned Iran on social media not to retaliate by attacking Qatari LNG facilities again and threatened to "massively blow up the entirety of the South Pars Gas Field" if it did so. Qatar shares the South Pars gas field, the world’s largest, with Iran.
Iran's Response
IRAN SAYS WILL SHOW 'ZERO RESTRAINT' IF ATTACKED AGAIN
Israeli Prime Minister Benjamin Netanyahu said in a call that he would not attack any more Iranian energy facilities, Trump said on Thursday.
Iran will show "zero restraint" if its infrastructure is attacked again, Foreign Minister Abbas Araqchi said on X.
Ongoing Disruptions in the Region
Gas prices in Europe have doubled since late February before the U.S. and Israel launched attacks on Iran.
Oil loadings by Saudi Arabia at the Red Sea port of Yanbu were disrupted briefly on Thursday, two sources told Reuters, after a drone fell on the nearby Aramco-Exxon refinery, SAMREF.
The port is the only export outlet for the world's largest oil exporter after Iran effectively blocked tanker traffic leaving the Gulf via the Strait of Hormuz.
Kuwait Petroleum Corp's Mina al-Ahmadi and Mina Abdullah refineries were also targeted by drones on Thursday, resulting in fires at both sites, the state news agency said.
The UAE shut its Habshan gas facilities after intercepting missiles early in the day. No injuries were reported, the Abu Dhabi Media Office said.
UAE authorities said they were responding to an incident at the Bab oilfield caused by falling debris from intercepted missiles.
(Reporting by Yomna Ehab, Jaidaa Taha, Marwa Rashad, Florence Tan, Hatem Maher, Yousef Saba, Jana Choukeir, Stephanie Kelly; Writing by Charlie Devereux; Editing by Sharon Singleton, Barbara Lewis and David Gregorio)
