Global oil and gas prices jumped on Tuesday as the US-Israeli war on Iran halted energy exports from the Middle East, with Tehran attacking ships and energy facilities, closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.
Oil prices have risen more than 15 percent since Friday, and the benchmark Brent Crude contract gained 6 percent on Tuesday to above $82 per barrel, the highest since July 2024, while European gas prices have soared 40 percent, adding to a 40 percent surge on Monday. Sugar, fertiliser and soy prices have all risen too.
The conflict risks triggering a renewed spike in inflation that could choke off economic recovery in Europe and Asia if the war is prolonged in a region that accounts for just under a third of global oil production and almost a fifth of natural gas.
Shipping at a standstill
Traffic through the Strait of Hormuz was closed for a fourth day after Iran attacked five ships, choking off a key artery accounting for about 20 percent of global oil and gas supply.
On Tuesday, a fuel tank at Oman’s Duqm commercial port was hit and a fire broke out at the United Arab Emirates' Fujairah, one of the key regional oil hubs.
On Monday, Qatar shut down its liquefied natural gas facilities, some of the world's biggest, which supply around 20 percent of global LNG exports, Saudi Arabia suspended production at its largest domestic refinery. At the same time, Israel and Iraq also shut down chunks of their gas and oil output.
US President Donald Trump launched the biggest foreign policy gamble of his presidency so far on Saturday, attacking Iran and killing Supreme Leader Ali Khamenei.
In the US, where gasoline prices are a key political pressure point, the cost jumped above $3 per gallon for the first time since November, just weeks after Trump touted his achievements in bringing prices down to $2.
Higher pump prices pose a major risk for Trump and his fellow Republicans as they head into the midterm elections in November, with many Americans struggling to keep up with rising costs for everyday goods.
Treasury Secretary Scott Bessent and Energy Secretary Chris Wright will announce plans on Tuesday to mitigate the impact of the price spike on Americans, Secretary of State Marco Rubio has said.
India, one of the most dependent countries on oil and gas from the Middle East, has said it has started to ration gas supplies to industries after Qatar's production was shut down.
Most Qatari LNG flows to Asia, but some also flows to Europe, which is entirely dependent on imports for its oil and gas needs. Europe is expected to scramble to replenish stocks, depleted by a cold winter, and will need to rely even more on US gas, after shunning Russian gas after its 2022 invasion of Ukraine.
Shipping rates around the world have also jumped to an all-time high as the conflict has intensified and Tehran has targeted ships passing through the strait.
The closure of the Strait of Hormuz has meant hundreds of tankers loaded with oil and LNG are stranded near big hubs, such as the UAE port of Fujairah, unable to reach customers in Asia, Europe and elsewhere.
Tanker shortage to force production cuts
It also means Saudi Arabia, the UAE, Iraq, Kuwait and Iran will need to begin cutting oil production within days unless they can find new tankers to transport oil that is still coming from under the ground.
Western security experts are seeking to assess how many missiles and drones Iran has left to keep up the intensity of its attacks.
Saudi Arabia, the UAE, Oman and Kuwait have so far managed to intercept most missiles and drones targeting energy facilities, ports and airports, but worries mount if their anti-drone and anti-missile stockpiles are running low.
