Gas Prices Surge 25% After Iran Strikes Qatar's LNG Hub

Energy markets have been thrown into fresh turmoil after Iran launched missile strikes on Qatar's Ras Laffan liquefied natural gas (LNG) facility. Ras Laffan is one of the world's most significant energy hubs, and the strike has resulted in a sharp spike in gas and oil prices and increased fears about long-term disruption to global gas and oil supplies.

UK and European gas prices jumped roughly 25% in early Thursday trading, with UK gas hitting around 175p per therm before easing slightly to 169p. European prices rose by more than 20%. Oil prices have also risen, with Brent crude climbing around 10% to above $119 a barrel at one point before pulling back. The price of gas in Europe is now more than double what it was before the US-Israeli war with Iran began.

The strikes on Ras Laffan followed reports that Israel had hit Iran's South Pars gas field, which is one of the world's largest natural gas reserves, on Wednesday evening. Iran retaliated by targeting the adjacent Qatari facility, causing what Qatar described as "sizeable fires and extensive further damage." Qatar's interior ministry said it had "initially brought the fire in Ras Laffan under control, with no injuries reported," but the damage to infrastructure is expected to be long-lasting. Qatar, which produces a fifth of the world's LNG, had already halted production at its facilities earlier this month due to the conflict. Iran also suspended gas exports to Iraq to protect its own domestic supplies, a senior Iraqi official told Reuters.

Matthieu Favas, commodities editor at The Economist, told BBC Radio 4's Today programme the market reaction reflected a fundamental reassessment of supply. "This is on account of the attack of the gas facility in Qatar, which was offline, but the hope would be that it would be restarted within weeks, but the attack now — several missiles aimed at this facility, one of them hitting directly — makes it clear that this is unlikely to happen. This could last months and these facilities provide a fifth of the global supply of liquid natural gas, which is why the market is reacting the way it is now, it's pricing in long-lasting disruption."

Nick Butler, former head of strategy at BP, said the gas from Ras Laffan "can't be substituted very quickly at all, and maybe not for a very long time." He warned that markets now expect the situation to worsen. "I think the worry now is that the market is expecting things to get worse. That in their view, Mr Trump has opened a Pandora's box, and he's lost control of what is happening day-to-day in the region."

Iran's military had explicitly threatened this kind of retaliation. In a statement published by the IRGC-affiliated Tasnim news agency, it said: "If the fuel, energy, gas, and economic infrastructures of our country are attacked by the American-Zionist enemy, in addition to a powerful counterattack against the enemy, we will severely strike the origin of that aggression as well." Ras Laffan had been named by Iran as a possible target following the South Pars strike.

How has the US responded?

The White House has announced a 60-day suspension of the Jones Act, a law that restricts the use of foreign-made ships to transport goods between US ports, to allow "vital resources like oil, natural gas, fertiliser, and coal to flow freely." However, US maritime groups have said that the impact would be minimal, pointing out that pump prices are driven by commodity costs, not shipping fees. Trump also said he "knew nothing" of Israel's strike on South Pars, and that he had not authorised "this level of violence and destruction" while simultaneously threatening to "massively blow up the entirety" of Iran's South Pars gas field if Iran attacks Qatar again.

UK says crisis makes it clear that we need to reduce reliance on fossil fuels

In the UK, trade minister Chris Bryant said the situation had become "a really big moment for the UK economy" and signalled that Chancellor Rachel Reeves "will look at what we can do about the fuel duty cap." He said that the conflict underscored the urgency of reducing our reliance on fossil fuels: "The biggest message I take away from everything that's happening in the Gulf is, we need to make sure that we are not so dependent on oil and gas prices."

Energy analysts backed that view. Jess Ralston of the Energy and Climate Intelligence Unit said the spike would be "a major concern to bill payers, many of who are still carrying debt from the last gas crisis when Russia invaded Ukraine," and warned that North Sea drilling offered no solution. "Trying to squeeze more gas out of the North Sea has no real impact on the price households pay because it's set by international markets and these kind of world events caused by foreign actors like Putin. Put simply, if you want to insulate yourself from these kind of price shocks, use less gas."