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Oil prices have surged close to $110 per barrel following reports from Iran of an airstrike on a facility within the world’s largest natural gas field. This development has sent shockwaves through global markets, prompting a significant rise in Brent crude prices.
By the close of trading in London on Wednesday, Brent oil reached $108.21 per barrel, a noticeable increase from Tuesday’s closing price of $101.95. While this figure remains below the recent conflict high of $119.25, it is still considerably higher than the $73.08 recorded on February 27, before tensions began to rise.
Amidst this backdrop of volatility, Kathleen Brooks of XTB offered her perspective, saying, “If you thought it would be a straightforward lead-up to the FOMC meeting later this evening, think again.” Her comment underscores the market’s current state of unease.
“Markets are back in panic mode,” Brooks continued. “The Brent crude oil price is surging and has risen by another 5 percent today. Meanwhile, the gold price has dropped by 2.8 percent and is below $5,000 per ounce. Bonds are being sold off, yields are climbing, and the dollar is gaining strength.”
‘Markets are back in panic mode. The Brent crude oil price is surging and is higher by another 5 per cent today, the gold price is down 2.8 per cent and is below 5,000 dollars per ounce, bonds are getting sold off, yields are surging, and the dollar is rallying.’
She continued: ‘Iran has warned Gulf nations that their energy assets and infrastructure are now legitimate targets…The risk is that an oil shipping crisis is morphing into an oil supply crisis.’
The increase followed a report that facilities belonging to Iran’s oil industry in South Pars and Asaluyeh were attacked on Wednesday, Iranian state media reported, prompting Tehran to warn that it would target energy installations across Saudi Arabia, the United Arab Emirates and Qatar.
Analysts have warned that any attack in South Pars would raise the possibility of retaliatory attacks by Iran on Gulf energy facilities, including those belonging to oil majors in Qatar.
The Brent crude oil benchmark hit $109.91 a barrel on Wednesday afternoon following that facilities belonging to Iran’s oil industry in South Pars and Asaluyeh were attacked
Qatar called it an Israeli attack without mentioning any U.S. role.
The Qatari foreign ministry spokesperson called it a ‘dangerous and irresponsible’ escalation that put global energy security at risk.
Qatar has fully shut its liquefied natural gas production because of the war, cutting 20 per cent of the world’s LNG supplies, and any damage to facilities could extend the outage beyond May.
Tasnim news agency said the attacks targeted petrochemical facilities in South Pars and added that the extent of the damage was not yet clear.
Following the attack, Iranian gas flows to Iraq were halted as Iran diverted its gas domestically, a senior Iraqi official told Reuters. Tehran supplies between a third and 40 per cent of Iraq’s gas and power needs.
The Iran war has dealt a massive energy shock to the global economy by choking off exports of crude oil and liquefied natural gas through the Strait of Hormuz.
Iran has also attacked key export facilities in its Gulf neighbours, putting more upward pressure on energy prices, even though Saudi Arabia, Qatar, Oman, Iraq and the United Arab Emirates are not taking part in the US-Israeli attacks on Iran.
In the case of South Pars, the energy shock would appear to have a different target: not Iran’s exports, but its biggest source of domestic energy supplies in a country that sometimes struggles to produce enough electricity.
Iran relies heavily on gas to produce electricity and heat homes.
It is the fourth-largest consumer of natural gas in the world, behind the US, China and Russia, according to the Centre on Global Energy Policy at Columbia University, even though its economy is much smaller, In contrast to other Middle East countries, it uses gas for heating due to its cold climate and much of that use is subsidized, which discourages efficient use. South Pars is the main source.
A fire has been reported in Ras Laffan – arar’s main site for production of liquified natural gas
Although South Pars mainly supplies Iran’s domestic needs, global oil prices rose, and gas prices in Europe jumped 7 per cent on the news due to fears of Iranian retaliation on Gulf energy infrastructure.
‘The attack is a serious escalation which threatens retaliatory strikes on Gulf and Israeli production facilities,’ said Andres Cala, geopolitical analyst at energy intelligence firm Montel News.
Iran has suffered power shortages because of interruptions to gas supplies, even though on paper it has huge energy reserves. In July, public buildings had to shut down when a heat wave strained the power grid.
It comes as missiles caused ‘extensive damage’ in Qatar tonight, hours after Iran threatened to wage a ‘full-scale economic war’ by attacking energy facilities across the Middle East.
Video showed huge explosions in Ras Laffan – the country’s main site for production of liquefied natural gas – as well as Saudi Arabia’s capital Riyadh.
Energy sites in Saudi Arabia, the United Arab Emirates and Qatar were evacuated after Tehran warned it would hit them with strikes in ‘the coming hours’.
‘These centres have become direct and legitimate targets and will be targeted in the coming hours,’ the Islamic Republic warned.
Israel said Iran’s intelligence minister Esmail Khatib had been killed in an overnight airstrike in Tehran
Iran’s security chief Ali Larijani was also assassinated in Tehran
Earlier, Israel said Iran’s intelligence minister Esmail Khatib had been killed in an overnight airstrike in Tehran, marking the latest assassination to hit the regime.
Israel’s defence minister, Israel Katz, declared Khatib had been ‘eliminated’ and promised more ‘significant surprises’ today as the Israeli military hunts down high-ranking Iranian officials.
It comes as Iranians gather for the funeral of Ali Larijani, the assassinated security chief whose death was confirmed by Tehran last night. Larijani and military commander Gholamreza Soleimani were assassinated yesterday.