Iran threatens energy supplies; gas prices surge

Gas and oil prices, and consequently diesel prices, have risen sharply following the attacks by the US and Israel on Iran and Iran’s response. I Iran has targeted oil and gas infrastructure. It has also threatened the Strait of Hormuz, through which roughly one fifth of the world's traded oil and gas passes and has also carried out drone attacks on the largest oil refinery in Saudi Arabia, as well as on a gas plant and power station in Qatar. The country has halted LNG exports. The gas price has risen by nearly half. The oil price briefly rose above $82 per barrel this morning (Monday, March 2), only to fall back again. The gap between the high and the low was nearly $5. At the time of writing, the price is $79.03. That is still an increase of almost 9% compared with the closing price from last Friday, February 27 ($72.87 per barrel). The increase is caused by the attacks by Israel and the US on Saturday, February 28, on Iran and the country's response. Part of this risk had already been priced in. Since mid-January, the oil price has been rising amid reports that Trump was planning to attack Iran, and Iran in turn threatened to block the Strait of Hormuz. The Strait of Hormuz lies between Oman and Iran and forms the connection between the Persian Gulf and the Gulf of Oman and the Arabian Sea. According to the US Energy Information Administration (EIA), an average of 20 million barrels of oil per day passed through the strait in 2024, about 20% of global crude oil and petroleum products consumption and more than a quarter of the total global maritime trade in oil. Of this volume, 38% comes from Saudi Arabia (5.5 million barrels per day). According to the EIA, Saudi Arabia and the United Arab Emirates have pipelines that could bypass the Strait with a combined capacity of 2.6 million barrels per day. The agency estimates that 84% of the crude oil and 83% of the LNG shipped through the Strait in 2024 went to Asia, with China, India, Japan, and South Korea being the main markets. These markets are likely to be the most affected by disruptions in supply via the Strait of Hormuz, said the EIA. The European Union highlights the importance of the strait in a statement regarding the situation in the Middle East: The events in Iran must not lead to an escalation that could threaten the Middle East, Europe, and beyond, with unpredictable consequences, including economic ones. Disruption of crucial waterways, such as the Strait of Hormuz, must be avoided. The Iranian Foreign Minister, Abbas Araghchi, has told Al Jazeera that Iran has no plans to close the Strait of Hormuz or to do anything that would disrupt shipping there. While there is currently no actual blockade of the Strait of Hormuz, in practice, shipping is currently largely at a standstill. The region is currently unsafe for shipping. The United Kingdom Maritime Trade Operations (UKMTO) reports five attacks on vessels in the region, with ships hit in three cases. The most recent attack occurred this morning in the port of Bahrain where a ship caught fire. Iran is carrying out strikes across the region and also appears to be targeting the infrastructure of the Gulf states. The largest oil refinery in Saudi Arabia has halted production after a drone attack, reports news agency Bloomberg. According to the report, Ras Tanura refinery primarily produces diesel for Europe. Diesel rises sharply in the wake of oil. On March 1, the price was €138.32; at the time of writing, diesel costs €152.06 per 100 liters (based on 4,000 liters, LTO member price). An increase of 9.9%. Qatar halts LNG exportsGas prices have risen sharply. On the futures market TTF, the price was €31.96 per MWh before the weekend. At the time of writing, that is €47.84 per MWh, almost 50% higher. Roughly one fifth of the globally traded liquefied natural gas (mostly from Qatar) passes through the Strait of Hormuz, according to the US energy agency. This mainly finds its way to Asia. Qatar announced today that it will temporarily halt LNG production following Iranian drone attacks on a gasproduction facility and power station. Meanwhile, the filling levels of Dutch gas reserves are at a low point. Because gas was cheap and market players did not expect to make a return on it, the reserves are now only 10.6% filled according to data from Gas Infrastructure Europe.Necessity of strategic reserves?Research institute TNO raised the question a few weeks ago whether the Netherlands should not rely too much on the market for supply security. Now that Iran is closing the Strait of Hormuz, 2 billion cubic meters of gas per week or 110 billion cubic meters of gas per year can be blocked for an extended period, writes Rene Peters, director of gas technology at TNO, now on LinkedIn. This will primarily affect Asia, where most LNG from the Middle East goes. But indirectly, it will lead to market shifts and price increases that will also affect Europe. Just as the filling season for gas storage is about to start again. Perhaps it is time to rethink the resilience of our gas supply and the necessity of strategic reserves?