Oil and gas markets moved sharply higher as Iran continued to carry out strikes across the Middle East, escalating its response to sustained military action by the United States and Israel.
Natural gas prices jumped by almost 50% on Monday after QatarEnergy, one of the world’s largest exporters of liquefied natural gas, suspended production. The company said operations were halted following what it described as “military attacks” on its facilities.
Oil prices also reacted strongly. Brent crude, the global benchmark, climbed by around 10% to briefly trade above $82 a barrel. The rise followed reports that at least three ships were attacked near the Strait of Hormuz over the weekend. Iran subsequently warned commercial vessels against passing through the narrow channel off its southern coast, a vital route that carries roughly 20% of the world’s oil and gas supplies.
Global Markets Respond
In the US, the main stock market indices opened lower as investors reacted to the escalation. However, both the Nasdaq and the S&P 500 recovered those early losses and were slightly higher by the middle of the trading session.
European markets ended the day firmly in negative territory. In London, the FTSE 100 closed down 1.2%, with airline and travel stocks under particular pressure. The owner of British Airways recorded the steepest decline in the index as flight disruptions across Middle Eastern airspace intensified.
Banking stocks including Barclays, Standard Chartered and HSBC also fell, amid concerns that a sustained rise in energy prices could fuel inflation and reduce the scope for interest rate cuts by central banks. In contrast, oil and defence-related firms were among the strongest performers on the FTSE 100.
Elsewhere in Europe, France’s CAC 40 closed 2.2% lower, while Germany’s Dax extended earlier losses to finish the session down 2.6%.
Energy Facilities Hit
QatarEnergy, which is state-owned, said it had suspended LNG production after the country’s Qatar Ministry of Defence reported that an Iranian-launched drone had targeted a facility in Ras Laffan Industrial City. The ministry also said another drone struck a water tank linked to a power plant in Mesaieed, south of the capital, Doha.
In neighbouring Saudi Arabia, Saudi Aramco temporarily shut down its major oil refinery at Ras Tanura on the kingdom’s eastern coast after it was hit by a drone.
International shipping near the entrance to the Strait of Hormuz has slowed dramatically. Analysts warned that if the conflict drags on, energy prices could rise even further.
The UK Maritime Trade Operations said two vessels had been struck in recent days, while an “unknown projectile” was reported to have exploded in very close proximity to a third ship.
Following its initial surge, Brent crude retreated to around $79 a barrel, while US-traded oil remained up about 7.6%, trading near $72.20.
“The market isn’t panicking,” said Saul Kavonic, head of energy research at MST Marquee. “There is greater clarity that, so far, oil transport routes and production infrastructure have not been primary targets. The market will be watching closely for signs that traffic through the Strait of Hormuz resumes, which could allow prices to ease.”
Inflation and Interest Rate Concerns
Despite the pullback in oil prices, some analysts warned that crude could climb above $100 a barrel if the conflict becomes prolonged, with knock-on effects for inflation and interest rates.
Robin Mills, chief executive of Dubai-based consultancy Qamar Energy and a former executive at Shell, said the impact of rising prices would be felt quickly.
“The jump in prices feeds through almost immediately because oil traders are reacting in real time to the news,” he said. “Prices are still below where they were two years ago, so we’re not yet in full-blown oil crisis territory.”
On Sunday, the OPEC+ group agreed to increase oil output by 206,000 barrels a day in an effort to limit price increases, though some analysts questioned whether the move would have much effect.
Edmund King, president of the AA, warned that the disruption could push up fuel prices globally.
“The turmoil and bombing across the Middle East are likely to disrupt oil distribution worldwide, which will inevitably result in higher pump prices,” he said. “How severe and how long those increases last will depend on the duration of the conflict.”
Subitha Subramaniam, chief economist and head of investment strategy at Sarasin & Partners, said sustained high oil prices would ripple through the wider economy.
“If elevated oil prices persist, they will cascade into other sectors such as food, agriculture and industrial commodities,” she said. “That’s when inflation really starts to bite.”
Inflation has been easing in the UK, prompting the Bank of England to cut interest rates. Subramaniam suggested the Bank may now opt to keep rates unchanged at 3.75%, despite earlier signals that further cuts could follow.
Shipping Disruptions Deepen
On Sunday, Iran’s Islamic Revolutionary Guard Corps claimed that three tankers linked to the UK and the US had been hit by missiles and were burning. Neither government has commented on the claim.
The UKMTO said it had received reports of “multiple security incidents” across the Arabian Gulf and the Gulf of Oman, advising vessels to transit with caution.
According to ship-tracking platform Kpler, at least 150 tankers have anchored in open waters beyond the Strait of Hormuz, although a small number of Iranian and Chinese vessels passed through on Monday.
“Because of Iran’s threats, the strait is effectively closed,” said Kpler analyst Homayoun Falakshahi.
Meanwhile, Danish container shipping group Maersk said it would pause sailings through the Bab el-Mandeb Strait and the Suez Canal, rerouting vessels around the Cape of Good Hope.
