Oil and gas markets reacted sharply as Iran pressed ahead with missile and drone strikes across the Middle East, responding to continued military action by the United States and Israel.
Natural gas prices surged almost 50% on Monday after QatarEnergy, one of the world’s largest exporters of liquefied natural gas, suspended output following what it described as “military attacks” on its infrastructure.
Oil prices also spiked. Brent crude, the global benchmark, jumped by about 10%, briefly climbing above $82 a barrel. The surge followed reports that at least three vessels were attacked near the Strait of Hormuz over the weekend. Iran subsequently warned commercial ships not to transit the narrow passage off its southern coast—a route that handles roughly 20% of global oil and gas shipments.
Markets React, Then Stabilise
In the United States, the initial shock rippled through financial markets. The Dow Jones and S&P 500 opened lower, though losses were later erased, with both the S&P 500 and Nasdaq edging into positive territory by the middle of the trading session.
European markets fared worse. London’s FTSE 100 closed down 1.2%, weighed heavily by travel stocks. The parent company of British Airways recorded the sharpest decline in the index as flight disruptions across Middle Eastern airspace intensified. Banking stocks, including Barclays, Standard Chartered and HSBC, also slid amid fears that sustained energy price increases could reignite inflation and slow the pace of interest-rate cuts.
By contrast, oil and defence companies were among the strongest performers on the FTSE.
Elsewhere in Europe, France’s CAC 40 ended the day 2.2% lower, while Germany’s Dax extended losses to finish down 2.6%.
Energy Infrastructure Under Fire
QatarEnergy confirmed it had halted LNG production after Qatar Ministry of Defence reported that an Iranian-launched drone targeted facilities at Ras Laffan Industrial City. Another drone was said to have struck a water tank linked to a power plant in Mesaieed, south of Doha.
In neighbouring Saudi Arabia, Saudi Aramco temporarily shut down its major Ras Tanura refinery on the kingdom’s eastern coast after it was hit by a drone.
Shipping through the Strait of Hormuz has slowed dramatically. Analysts warned that if hostilities persist, energy prices could climb even higher.
The UK Maritime Trade Operations reported that two vessels had been hit in recent days, while an “unknown projectile” detonated dangerously close to a third ship.
After its sharp rally, Brent crude eased back to around $79 a barrel, while US benchmark oil remained up roughly 7.6%, trading near $72.20.
“The market isn’t panicking,” said Saul Kavonic, head of energy research at MST Marquee. “So far, oil transport routes and production infrastructure haven’t been the primary targets. Traders will be watching closely to see whether traffic through the Strait of Hormuz resumes—if it does, prices could ease again.”
Inflation Fears and Global Fallout
Despite the pullback, several analysts warned that a prolonged conflict could send oil prices beyond $100 a barrel, with serious implications for inflation and interest rates worldwide.
Robin Mills, chief executive of Dubai-based consultancy Qamar Energy and a former Shell executive, said the reaction was already filtering through the market.
“Oil traders respond almost instantly to developments like this,” he said. “Prices are still lower than they were two years ago, so this isn’t a full-blown oil crisis yet—but the risks are clear.”
On Sunday, the OPEC+ alliance agreed to raise production by 206,000 barrels per day in an effort to dampen price pressures. However, some analysts questioned whether the increase would be sufficient if the conflict escalates.
Edmund King, president of the AA, warned motorists could soon feel the impact.
“The turmoil and bombing across the Middle East are almost certain to disrupt global oil distribution,” he said. “That will translate into higher pump prices. How severe and how long-lasting those increases are will depend entirely on how long the conflict continues.”
Subitha Subramaniam, chief economist at Sarasin & Partners, said persistently high oil prices could ripple across the economy.
“If elevated energy prices last, they will spill over into food, agriculture and industrial commodities,” she said. “That’s when inflation really starts to bite.”
In the UK, inflation has been easing, prompting the Bank of England to cut interest rates recently. Subramaniam suggested policymakers may now opt to hold rates steady at 3.75%, despite earlier indications that further reductions were possible.
Shipping Disruptions Widen
On Sunday, Iran’s Islamic Revolutionary Guard Corps claimed that three tankers linked to the UK and the US had been struck by missiles and were on fire. Neither country has confirmed the claim.
The UKMTO said it had received reports of “multiple security incidents” across the Arabian Gulf and the Gulf of Oman, urging vessels to proceed with caution.
Data from ship-tracking firm Kpler showed at least 150 tankers anchored in open waters beyond the Strait of Hormuz. Only a small number of Iranian and Chinese ships were reported to have passed through on Monday.
“Because of Iran’s threats, the strait is effectively closed,” said Kpler analyst Homayoun Falakshahi.
Meanwhile, Danish shipping giant Maersk said it would suspend sailings through the Bab el-Mandeb Strait and the Suez Canal, rerouting vessels around the Cape of Good Hope instead.
