Oil prices surge after Israeli strike on Iran’s South Pars gasfield

There are fears that a period of elevated oil and gas prices could trigger a damaging wave of global inflation.

Oil prices have risen more than 5 percent following an Israeli strike on Iran’s South Pars gasfield as the United States-Israeli war on the country continues to escalate.

Brent crude, the international standard, rose 5 percent to $108.66 a barrel on Wednesday, while US West Texas Intermediate crude CLc1, the price barometer for US oil, gained 2.5 percent to $98.65, widening its discount to Brent to the largest since May 2019 on fears of a prolonged conflict.

Iranian state media reported that natural gas facilities associated with its offshore South Pars field – the largest gasfield in the world, located off the coast of southern Iran’s Bushehr province – were attacked.

Promptly after, Iran’s Revolutionary Guard threatened to attack oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab Emirates, heightening the risk of further disruptions to energy supplies in the region.

Later on Wednesday, Qatari authorities reported a fire at the country’s Ras Laffan gas facility after an Iranian ballistic missile attack. Qatar’s Interior Ministry later said the fire had been brought under control.

The US-Israeli war on Iran and Tehran’s retaliatory attacks on Gulf neighbours have disrupted oil and natural gas exports from the Middle East and forced production stoppages.

If the disruptions keep oil and gas prices elevated for an extended period, experts say the global economy could experience a wave of inflation.

Fighting has halted most shipments via the Strait of Hormuz, through which 20 percent of global oil and liquified natural gas supplies pass. Total oil output cuts in the Middle East are estimated at 7 million to 10 million barrels per day or 7 percent to 10 percent of global demand.

In response, the Trump administration announced earlier on Wednesday a 60-day waiver of the Jones Act shipping law, temporarily allowing foreign-flagged vessels to move fuel, fertiliser and other goods between US ports.

The United States also issued a general licence, authorising certain deals involving Venezuela’s state oil company PDVSA, the US Treasury Department said on Wednesday.

In Iraq, North Oil Company sources said exports had resumed via pipeline after Baghdad and the Kurdistan Regional Government agreed on Tuesday to restart flows.

Two oil officials said last week Iraq was seeking to pump at least 100,000 bpd through the port.