The war between the US, Israel, and Iran entered a new, more destructive phase this week with successful strikes on oil and gas production sites. Brent crude prices responded by jumping 3% to $103.20, while wholesale gas prices in Europe rose to €52 per megawatt hour. These figures highlight the market’s fear as the conflict threatens to permanently damage energy infrastructure.
The UAE’s Shah natural gasfield was forced to shut down after a drone strike on Monday caused extensive fire damage. This was accompanied by attacks on Iraq’s Majnoon oilfield and the Fujairah storage terminal. For the first time in the conflict, the attackers were able to hit extraction points, rather than just the terminals where oil is stored or loaded.
Fujairah’s role as a vital export terminal has been compromised following a projectile strike on a tanker and subsequent fires at the port. This has effectively cut off the UAE’s last major outlet for oil, as the Strait of Hormuz is already under an Iranian “stranglehold.” The UAE’s daily output has now fallen to less than half of its pre-war levels.
According to Goldman Sachs, the current market disruption is one of the largest on record, with refined products feeling the most pressure. The production of jet fuel and diesel is at high risk because the supply of medium-heavy crude has been so severely interrupted. This is leading to a shift toward coal and other alternative energy sources in energy-starved Asian countries.
As the crisis deepens, leaders in Asia are taking unprecedented steps to manage their domestic energy use. Sri Lanka has declared emergency public holidays, and Thailand is urging a national reduction in air conditioning and elevator use. Despite the chaos, Iranian officials have denied any high-level diplomatic talks with the US, suggesting the conflict may continue to escalate.