Global oil and gas prices jumped on Tuesday as the US-Israeli war on Iran halted energy exports from the Middle East, with Tehran attacking ships and energy facilities, closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.
The benchmark Brent crude oil contract gained nearly eight per cent on Tuesday to above $83 per barrel, the highest since July 2024, taking gains since Friday to more than 15 per cent.
European gas prices soared as much as 40 per cent before paring gains, adding to a 40 per cent surge on Monday. Sugar, fertiliser and soy prices have all risen too.
The conflict risks triggering a renewed spike in inflation that could choke off economic recovery in Europe and Asia if the war is prolonged in a region that accounts for just under a third of global oil production and almost a fifth of natural gas.
Iraq, OPEC's second-largest producer, on Tuesday said it may be forced to cut production by more than three million barrels per day in a few days if oil tankers cannot move freely to loading points, according to two Iraqi oil officials.
As of Tuesday, Iraq has decreased production from the Rumaila oil field by 700,000 bpd and cut 460,000 bpd from the West Qurna 2 field, the officials said.
Traffic through the Strait of Hormuz was closed for a fourth day after Iran attacked five ships, choking off a key artery accounting for about 20 per cent of global oil and LNG supply.
Crude tanker transits through the strait fell to four vessels on March 1, the day after hostilities broke out, versus an average of 24 per day since January, according to Vortexa vessel-tracking data.
Three of the four were Iran-flagged. Hundreds of tankers loaded with oil and LNG are stranded near big hubs, such as the United Arab Emirates' port of Fujairah, unable to reach customers in Asia, Europe and elsewhere.
Some companies are trying to find alternative routes. Saudi oil giant Aramco is attempting to reroute some of its crude to its western Red Sea port of Yanbu, but sources, including buyers, traders and analysts, said Aramco's east-west pipeline had limited capacity and could become a target of attacks by Iran's allies.
On Tuesday, a fuel tank at Oman’s Duqm commercial port was hit by a drone and a fire broke out at the UAE's Fujairah, one of the key regional oil hubs, slowing ship refuelling and potentially shifting demand to other ports including Singapore.
On Monday, Qatar shut down its liquefied natural gas facilities, some of the world's biggest, which supply around 20 per cent of global LNG exports, Saudi Arabia suspended production at its largest domestic refinery, while Israel and Iraq's Kurdistan also shut chunks of their gas and oil output.
Elsewhere in the world, Chinese refiners have started to shut units in response to the conflict's impact on crude supply, while India, one of the most dependent countries on oil and gas from the Middle East, has said it has started to ration gas supplies to industries after Qatar production was shut down.
In the US, where gasoline prices are a key political pressure point, the cost jumped above $3 per gallon for the first time since November, just weeks after President Donald Trump touted his achievements in bringing prices down to $2.
Higher prices at the pump mark a major risk for Trump and his fellow Republicans as they head into midterm elections in November.
US Treasury Secretary Scott Bessent and Energy Secretary Chris Wright will announce plans on Tuesday to mitigate the impact of the price spike on Americans, Secretary of State Marco Rubio has said.
Most Qatari LNG flows to Asia, but some also flows to Europe, which is entirely dependent on imports for its oil and gas needs.
Europe is expected to scramble to replenish stocks, depleted by a cold winter, and will need to rely even more on US gas, after shunning Russian gas after its 2022 invasion of Ukraine. Shipping rates around the world have also jumped to an all-time high as the conflict has intensified and Tehran has targeted ships passing through the strait.
Western security experts are seeking to assess how many missiles and drones Iran has left to keep up the intensity of its attacks. Saudi Arabia, the UAE, Oman and Kuwait have so far managed to intercept most missiles and drones targeting energy facilities, ports and airports but worries mount if their anti-drone and anti-missile stockpiles are running low.
(Reporting by Yousef Saba, Ahmed Elimam; additional reporting by Ahmad Ghaddar and Alex Lawler in London and Nidhi Verma in Delhi; Writing by Dmitry Zhdannikov and Nina Chestney; Editing by Sharon Singleton)