LNG prices in Europe surged more than 50% after Qatar shut down production at the world’s largest export facility after it was targeted in an Iranian drone attack. The unprecedented halt marks a dramatic escalation of the Iran war that now threatens energy security worldwide.
European benchmark gas futures jumped the most in nearly four years, after QatarEnergy confirmed on Monday that output had been suspended. Tankers had already largely stopped transiting the Strait of Hormuz—a critical artery for global fuel shipments.
QatarEnergy’s Ras Laffan plant supplies about a fifth of global LNG supply. The situation risks the most serious shock to gas markets since Russia’s invasion of Ukraine four years ago upended global energy trade.
While Asian countries buy most of the LNG shipped from the Middle East, any disruption would increase competition for alternative supplies—pushing up prices worldwide, including in Europe.
The shutdown of the plant “marks an abrupt acceleration in the energy implications of the situation,” said Simone Tagliapietra, an analyst at Bruegel. “The threat to security of supply is here and now. The extent of it will depend on the duration of the shutdown, but we are now into a new scenario.”
Shipping risks are compounding the disruption. The Strait of Hormuz is a key shipping route for energy, carrying about a fifth of the world’s liquefied natural gas exports.
The dramatic slowdown of traffic through the waterway has created major bottlenecks potentially causing fuller storage tanks for QatarEnergy.
More than half of the world’s largest maritime insurance clubs will stop providing war-risk cover for vessels entering the Persian Gulf starting 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.
Gas trade disruptions in the Middle East could also eventually raise spot LNG demand from Turkey, according to BloombergNEF, as it imports pipeline fuel from Iran.
“The price shock from the loss of Middle East LNG could be similar to 2022, after Russia’s invasion of Ukraine,” said Mike Fulwood, senior research fellow at the Oxford Institute for Energy Studies. Such a surge “could have dire consequences for government budgets in Europe and Asia.”
The conflict continues to deepen, with blasts heard across Israel, Saudi Arabia, Qatar and the United Arab Emirates, as states intercepted Iranian missiles launched in response to US-Israeli strikes. US President Donald Trump said the bombing campaign against Iran could last for weeks.
