The escalating military conflict between the United States, Israel, and Iran has turned global energy markets completely upside down, triggering a crisis that analysts are describing as one of the most severe and wide-ranging supply shocks in modern history. In a single trading session on Monday, European gas prices surged 41%, oil climbed to a 14-month high, and stock markets across the world fell sharply as the full scale of the disruption became apparent to investors and policymakers alike.
The immediate causes of the market turmoil are multiple and compounding in nature. Qatar, the world’s most important exporter of liquefied natural gas, suspended production at its flagship Ras Laffan and Mesaieed facilities following drone attacks linked to the widening regional conflict. The shutdown threatens to remove close to 20% of global LNG supply from the market at a time when energy systems around the world are still recovering from the disruptions of the 2022 crisis. The loss of Qatari output has created an immediate and severe supply shortfall that alternative producers cannot quickly fill.
Simultaneously, the Strait of Hormuz, through which roughly one-fifth of the world’s oil and a substantial share of global LNG shipments pass, faces effective closure. Iran reportedly warned tankers against attempting to transit the waterway following US and Israeli military strikes, and two commercial vessels were attacked in the strait over the weekend. Marine tracking systems confirmed that tankers were backing up on both sides of the narrow waterway, creating an unprecedented bottleneck in one of the world’s most critical energy corridors. Major shipping company Maersk announced the suspension of all transits through both the Strait of Hormuz and the Suez Canal for safety reasons.
Oil markets responded with alarm to the scale of the disruption. Brent crude surged as much as 13% in early trading to reach 82 dollars a barrel, the highest level seen in 14 months, before settling back to around 77 dollars as some of the initial panic premium was unwound. Analysts warned that if the Strait of Hormuz remains closed for an extended period, oil prices could exceed 100 dollars a barrel, with severe consequences for the global economy. OPEC+ agreed to a modest production increase of 206,000 barrels per day for April, but analysts pointed out that the additional output is itself stranded behind the same Hormuz bottleneck as existing Middle Eastern exports.
Financial markets worldwide reflected the depth of investor concern about the economic consequences of the crisis. European stock markets fell broadly, with Germany’s DAX declining 2.4%, France’s CAC 40 losing 2.2%, and Spain’s IBEX dropping 2.6%. London’s FTSE 100 fell 1.2% to 10,780 points, cushioned somewhat by strong gains in oil companies BP and Shell, which each rose approximately 3% as higher crude prices boosted their earnings outlook. Defence stocks were among the outperformers, with BAE Systems rising 5% as investors anticipated increased government military spending. Gold climbed 2.5% to 5,408 dollars an ounce as investors sought the security of traditional safe-haven assets. Aviation stocks were among the worst performers of the session, with IAG falling 6% and easyJet declining 4% as thousands of flights were cancelled across the region. In Asia, Tokyo’s Nikkei 225 fell nearly 2.4% before partially recovering, while China’s Shenzhen Composite declined 0.7%.