European Gas Prices Surge 45% on Iran Conflict

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

European gas prices have shot up by 45% following a decision by Qatar to halt liquefied natural gas (LNG) production at the world's largest LNG liquefaction plant.

Drone Attacks Hit Gas Prices

European gas prices have surged by up to 45% in recent days after QatarEnergy called a halt to production at its Ras Laffan liquefied natural gas (LNG) plant in Qatar following drone attacks by Iran. 

In a statement, the company said: "Due to military attacks on QatarEnergy's operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of liquefied natural gas and associated products." Ras Laffan supplies around 12-14% of Europe's LNG imports and 20% of the world's LNG. The news of its shutdown caused a massive spike in prices in Europe with trading on the Dutch TTF hub hitting 46 euro (US$53) per megawatt-hour (MWh) in early afternoon trading on Monday. That figure has since risen to a high of 59 euro (US$68) per MWh. QatarEnergy has not released any details of the damage caused nor when the plant will resume operations. 

U.S. Leads Attacks on Iran

QatarEnergy's production stoppage comes as a result of the conflict in Iran, sparked by missile attacks by the U.S. and Israel over the weekend, which in turn has led to drone strikes by Iran on facilities and U.S. military targets in Qatar, Bahrain, Saudi Arabi, the United Arab Emirates (UAE) and Iraq. On Monday, Industrial Info reported on the closure of the Ras Tanura petroleum refinery in Saudi Arabia following a drone attack. For additional information, see March 02, 2025, article - Saudi Refinery Closed after Drone Attack.

The Strait of Hormuz

This latest Middle East conflict has the potential to greatly impact oil and gas prices globally, thanks to the strategic importance of the Strait of Hormuz. The narrow passage is largely controlled by Iran and is one of the world's most important routes for seaborne oil and gas, including LNG from Qatar. According to analysts Wood Mackenzie, it carries around 15% of the world's oil supply and Iran has moved to block traffic through the strait. 

"The Strait of Hormuz is a key maritime traffic route, and its closure presents a major risk of disruption to global oil and gas/LNG markets," stated Wood Mackenzie. "Iran is reported to have warned shipping not to traverse the Strait of Hormuz. Tanker traffic through this waterway has effectively ceased for the time being, after insurance coverage was withdrawn over the weekend. There are also reports of vessels in the Strait being attacked, with the tanker Skylight on fire and its crew evacuated.The Strait of Hormuz is the artery through which about 15% of global oil supply flows, primarily crude and condensate, but also petrochemical feedstocks, jet fuel and diesel/gasoil. The loss of these exports to the global oil market will be significant; the key question is how long before vessels are free to re-establish export flows."

If supplies to Asia are disrupted, there are fears that Europe and Asia will again end up in a bidding war for LNG cargoes, which will drive prices even higher in the coming months and beyond. China relied on Qatar for 29% of LNG imports last year while India gets 45% of its LNG from Qatar. 

Europe's Gas Problem

Europe has increasingly relied on LNG imports since Russia's invasion of Ukraine in 2022 and the European Union's (EU's) decision to end its historic reliance on Russian oil and gas. It is also contending with low gas storage volumes following a colder-than-average winter in January. The latest data from Gas Infrastructure Europe (GIE) puts storage levels below 30%, one of the lowest recorded levels for late February. Last year, gas reserves on February 28 stood at 38.2% and at 62.7%. 

Key Takeaways

• European gas prices are rocketing following the shutdown of Qatar's Ras Laffan LNG plant due to Iranian drone attacks.
• European gas storage levels are at a record low.
• Iranian threats to oil and gas shipping on the vital Strait of Hormuz may lead to global shortages.

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