Iran-Israel War: Oil Prices Surge as Attacks Hit Gulf Energy Facilities

The conflict between Israel and Iran intensified this week with reciprocal attacks on energy infrastructure, sending shockwaves through global markets and raising fears of wider regional escalation. While Iran has effectively curtailed oil shipments through the Strait of Hormuz to nations it deems aligned with the US and Israel, a temporary reprieve came today with Israeli Prime Minister Benjamin Netanyahu announcing a halt to further strikes on Iranian gas fields at the request of US President Donald Trump. This pause, still, appears contingent on Iran ceasing its attacks on energy facilities in the Gulf region.

Escalation and Energy Markets

The latest escalation began with Israeli strikes targeting oil and natural gas facilities around the Gulf on Friday, a response to an earlier Israeli attack on a key Iranian gas field. These strikes prompted retaliatory attacks from Iran, targeting energy production and further stressing global supplies already constrained by Iran’s increasing control over the Strait of Hormuz, a vital waterway for approximately 20% of the world’s oil. Brent crude oil prices briefly surged above $119 a barrel, a more than 60% increase since the start of the conflict on February 28th. Natural gas prices in Europe likewise saw a significant jump, roughly doubling in the past month.

Qatar, Saudi Arabia, and the United Arab Emirates have condemned Iran’s attacks, with the Arab League Secretary-General Ahmed Aboul Gheit labeling them a “dangerous escalation.” Iran’s actions have extended beyond direct attacks, with a drone strike hitting a Saudi refinery on the Red Sea – a route Saudi Arabia had hoped to utilize as an alternative to the Strait of Hormuz. Further complicating matters, a vessel was reportedly set ablaze off the coast of the UAE and another damaged near Qatar.

The Strait of Hormuz and Global Energy Security

The Strait of Hormuz, a narrow waterway connecting the Persian Gulf with the Arabian Sea, is a critical chokepoint for global energy trade. As noted in a BBC report, approximately 20% of the world’s oil and liquefied natural gas (LNG) typically passes through the strait. In 2025, an estimated 20 million barrels of oil and oil products transited the strait daily, representing nearly $600 billion worth of energy trade annually. Iran’s effective blockade of the strait, allowing passage only to vessels from countries not aligned with the US and Israel, has significantly disrupted global energy flows and contributed to the recent price spikes.

The situation is further complicated by Iran’s targeting of energy infrastructure in neighboring countries. Attacks on facilities in Qatar and Saudi Arabia demonstrate a willingness to broaden the scope of the conflict and exert pressure on regional partners of the United States, and Israel. Qatar, a major exporter of LNG, saw extensive damage to its Ras Laffan facility, potentially delaying its ability to restore supplies even after the conflict ends. The attack on the Saudi refinery, intended as an alternative export route, underscores the challenges of circumventing the Strait of Hormuz.

US and Israeli Objectives and Iranian Retaliation

The Trump administration has articulated several objectives in the conflict, including degrading Iran’s missile capabilities and its nuclear program. The killing of senior Iranian leaders has also been a priority. Defence Secretary Pete Hegseth has suggested that further targeting of leaders within the Islamic Revolutionary Guard Corps (IRGC) and the Basij force is possible. US forces have reportedly conducted strikes deeper into Iranian territory, targeting Iranian boats in the Strait of Hormuz and underground weapon storage facilities.

Iran’s attacks are largely seen as retaliation for the killing of its supreme leader Ali Khamenei and other high-ranking officials in the initial stages of the conflict. Despite suffering significant losses in terms of leadership and military capabilities, Iran remains capable of launching missile and drone attacks that threaten its neighbors and disrupt the global economy. The recent execution of three men linked to the 2025 nationwide protests signals a continued crackdown on internal dissent.

What’s Confirmed and What Remains Unclear

Confirmed: Israel has conducted strikes on Iranian gas fields and other energy infrastructure. Iran has retaliated by attacking energy facilities in Saudi Arabia, Qatar, and the UAE, and has effectively restricted passage through the Strait of Hormuz. Global oil and gas prices have risen sharply. Several Iranian leaders have been killed in airstrikes.

Unclear: The extent of damage to energy facilities in Qatar and Saudi Arabia remains somewhat unclear, as does the long-term impact on production and export capacity. The precise details of the agreement between Netanyahu and Trump regarding further strikes on Iranian gas fields are also not fully public. The full scope of US military involvement and the extent of damage inflicted on Iranian targets are subject to ongoing reporting and verification. The long-term political consequences of the conflict, particularly within Iran, are also uncertain.

The Broader Regional Context

The conflict extends beyond direct attacks between Israel and Iran. Israeli strikes against the Iranian-backed Hezbollah militant group in Lebanon have displaced over a million people, exacerbating the humanitarian crisis in the region. The situation in the Red Sea, with the attack on the Saudi refinery, highlights the potential for the conflict to spread to other critical energy transit routes. The involvement of other regional actors, such as Pakistan and India, which have reportedly been granted safe passage through the Strait of Hormuz by Iran, underscores the complex geopolitical dynamics at play. As reported by Al Jazeera, Iran has been selectively allowing passage to vessels from countries it deems neutral.

Looking Ahead: Procedural Next Steps

The immediate future hinges on whether Iran will adhere to the temporary halt in Israeli strikes on gas fields. The US and Israel will likely continue to monitor Iran’s actions closely and may resume offensive operations if they perceive a continued threat. Diplomatic efforts to de-escalate the conflict are ongoing, but prospects for a swift resolution appear limited. The Pentagon has requested $200 billion in additional funding, signaling a commitment to a prolonged engagement. The International Atomic Energy Agency (IAEA) will likely continue to monitor the situation at the Bushehr nuclear power plant and other Iranian nuclear facilities, seeking to ensure their safety and security. The coming weeks will be critical in determining whether the conflict can be contained or will escalate further, potentially drawing in additional regional and global actors.