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Iran has vowed to retaliate against oil and gas facilities across the Gulf after missiles hit South Pars, part of the world’s largest gasfield and the backbone of the Islamic republic’s domestic energy system.
The strike, which Iranian officials warned would trigger a significant escalation of the conflict, was the first against Iranian energy production facilities since the US and Israel launched their war on February 28, and also targeted petrochemical facilities fed by the field, Iranian state media said.
Oil and gas prices jumped as Iran’s Revolutionary Guards warned it would strike some of the biggest energy facilities across the region, including Qatar’s Ras Laffan LNG plant, facilities in the United Arab Emirates and Saudi Arabia’s Samref refinery on the Red Sea.
In early afternoon trading, Brent crude oil was up over 5 per cent at nearly $109 a barrel, its highest level since March 9, while European natural gas prices jumped 6.6 per cent to almost €55 per MWh.
The strike on South Pars is the first time that Iran’s gas production has been targeted. Iranian state media has previously reported that the facilities provide more than two-thirds of the country’s domestic gas. Neither the US nor Israel immediately said who was behind the attack.
Natural gas is the largest source of fuel for electricity generation in Iran, accounting for 85 per cent of total generation, according to the US’s Energy Information Administration.
Iraq, which relies on Iranian gas imports for electricity generation, said that flows from Iran had stopped completely on Wednesday afternoon and warned that it would “affect the grid”.
A former Iranian oil official said the war is now in the “beginning of a far more dangerous phase” and added that Iran “will level” Qatar’s gas platforms “to the ground if Iran’s main refineries are hit”.
Iranian officials said four parts of the South Pars gas processing facilities were struck and were forced offline “in order to control and prevent the spread of fire”, but the full extent of the damage was not immediately clear.
No deaths were reported in the attack.
Qatar and the UAE condemned the air strike that targeted Iran’s gas facilities, with Doha describing it as a “dangerous” and “irresponsible”. The UAE “stressed the need to avoid targeting vital facilities under any circumstances”.
South Pars is part of the world’s largest natural gasfield and is an extension of Qatar’s North Field, which before the conflict had helped turn Doha into one of the world’s largest suppliers of liquefied natural gas. Qatar had already suspended its exports because of an Iranian drone attack.
Torbjorn Soltvedt at risk agency Verisk Maplecroft, said the attack reinforced his view that the war “will most likely extend into May, with no immediate clear off-ramps in view”.
The war has already caused a huge disruption to energy supplies, with traffic in the Strait of Hormuz grinding to a near halt after Iran struck a number of vessels.
Normally about 20 per cent of the world’s oil and LNG passes through the narrow chokepoint each day, and some Asian countries are facing potential shortages or rationing.
US President Donald Trump, who made keeping energy prices low a key pitch to voters, has authorised the release of strategic oil reserves in coordination with other International Energy Agency members in a bid to keep prices down.
But the risk of a prolonged disruption or widening attacks on energy infrastructure could drive oil and gas prices even higher.
Richard Bronze, head of geopolitics at Energy Aspects, said that attacking gas production may be an attempt to destabilise Iran internally.
He added that this effort, combined with the US bombing Iran’s coastline on Tuesday night is “likely making traders realise the conflict can last for longer and the risk of damage to infrastructure is growing”.
The governor of Iran’s gas and petrochemical hub of Assaluyeh, which is fed by South Pars, said the strikes meant “the pendulum of war has swung” to a “full-scale economic war”.
“Energy security in the region has reached the point of zero,” Eskandar Pasalar said in comments in state media.
Iran has struck energy facilities across the Gulf during the war, including hitting refineries in the UAE and Saudi Arabia and targeted oil and gasfields in both countries.
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