Iran Conflict Threatens Global Energy Infrastructure and Sparks Price Surge
The escalating military conflict involving Iran has placed some of the world's most vital oil and gas infrastructure at severe risk, disrupting global energy supplies and sending prices soaring. Attacks by the United States and Israel on Iranian targets, coupled with retaliatory Iranian missile and drone strikes on neighbouring nations, have created widespread instability across the Persian Gulf region.
This turmoil has directly impacted the pipelines, refineries, and shipping terminals that facilitate the flow of energy from the Gulf to the global economy. The effective closure of the strategic Strait of Hormuz, due to the high risk of Iranian strikes, has trapped approximately twenty percent of the world's oil and liquefied natural gas (LNG) supplies, leaving them with no viable export routes.
Critical Infrastructure at Immediate Risk
Ras Laffan LNG Terminal, Qatar: Following a drone strike, state-owned QatarEnergy was forced to shut down this terminal, delivering a profound shock to global gas markets. Qatar produces around twenty percent of the world's LNG, and the Ras Laffan facility is the largest export terminal of its kind globally. The company has invoked force majeure, citing circumstances beyond its control that prevent it from fulfilling customer contracts.
Ras Tanura Port and Refinery, Saudi Arabia: Saudi Aramco's largest refinery, located on the Persian Gulf, was temporarily shut down after a drone impact caused a significant fire. This facility is a crucial hub for processing and exporting Saudi crude oil.
East-West Pipeline, Saudi Arabia: Operated by Saudi Aramco, this critical pipeline runs from the Aqaiq processing center to the Yanbu port on the Red Sea, providing an alternative route that bypasses the volatile Strait of Hormuz.
Fujairah Oil Terminal, United Arab Emirates: A key terminal for very large crude carriers on the Gulf of Oman, Fujairah enables Abu Dhabi to export a substantial portion of its oil without transiting the Strait of Hormuz. Reports from the analytical firm Rystad Energy indicate the terminal has been disrupted by the ongoing fighting.
Kharg Island, Iran: This tanker terminal has historically handled nearly all of Iran's pre-war crude exports, estimated at 1.6 million barrels per day, with the majority destined for China. Its current operational status remains unclear following the outbreak of hostilities.
Wider Regional Disruptions and Economic Impact
The conflict's ripple effects extend beyond direct attack sites. Israel's Energy Ministry directed Chevron to shut down the Leviathan natural gas field, the largest reservoir in the Mediterranean and a key supplier to Egypt. This mirrors a previous shutdown during a prior conflict, which led Egypt to curtail industrial gas supplies.
In Iraq, output has been suspended at key supergiant fields like Rumaila and West Qurna, amounting to 1.5 million barrels per day, due to rapidly dwindling storage capacity. The Al Basra Oil Terminal, which exports oil constituting eighty percent of Iraq's annual GDP, remains a high-value target in the Persian Gulf.
Furthermore, a missile strike halted operations at Bahrain's Bapco refinery on Sitra Island, disrupting supplies of jet fuel, diesel, and other critical petroleum products.
Global Energy Price Shock and Long-Term Concerns
The cumulative effect of these disruptions has been a dramatic surge in global energy prices. The international benchmark Brent crude oil price has skyrocketed from $72.97 just before the conflict began to nearly $103, raising costs for aviation, manufacturing, transportation, and agriculture worldwide.
"A significant amount of critical energy infrastructure has been forced to shut down, either from direct drone and missile damage or because production is being shut in as shipping grinds to a halt," explained Torbjorn Soltvedt, principal Middle East analyst at Verisk Maplecroft. "We are already witnessing the global ramifications."
Analysts warn that the logistical challenges are profound. Even if the Strait of Hormuz reopens swiftly, restarting production in shut-in oil and gas fields, as well as facilities like Qatar's LNG terminal, could take weeks or months, not days.
"It's not a switch that can be turned on and off," Soltvedt emphasised. "It will probably take weeks to get some of these facilities up and running again." This prolonged disruption threatens sustained volatility and elevated prices in global energy markets, with significant implications for the worldwide economy.
