It is hard to decide which is the bigger disaster: the unfolding car crash in the global gas market or the mounting danger that entire countries will run out of oil.
The benchmark TTF contract for gas in Europe was €29 (£25) per megawatt-hour (MWh) in mid-February. Bank of America says it could reach €500 this winter if the Strait of Hormuz remains closed for 10 weeks, as it may well do.
That would blow through the record high seen after Russia’s invasion of Ukraine and amount to a full-blown economic emergency for Europe, the UK, Japan, South Korea and South Asia.
The picture is dramatically worse after Israel attacked Iran’s South Pars gas field, adding upstream gas and oil infrastructure to the menu of targets on both sides of the Gulf.
Iran’s missile retaliation on Qatar’s Ras Laffan has inflicted serious damage to the giant complex, which alone produces a fifth of the world’s liquefied natural gas (LNG).
It will be months before shipments start again. Qatar Energy says 17pc of production is lost for three to five years. It will have to declare force majeure on LNG supplies to Italy, Korea, China and Belgium.
It is just as bad for oil. The paper market that we all follow does not capture the drama. Physical deliveries are under far greater stress than Brent futures, at about $113, would suggest.
Actual barrels of the Dubai basket and Oman’s Murban are fetching close to $170 a barrel as Asian refiners scramble to buy anything they can. Jet fuel deliveries have hit $210 in Rotterdam and $240 in Singapore.
Kurt Barrow, the vice-president of oil at S&P Global Energy, says it may become physically impossible to obtain supplies. “If the Strait stays closed for two months, you’ll have plants without feedstock and we’ll get real rationing. We’ll have panic buying and hoarding,” he said.
“This is the largest supply disruption ever. Net, we’re around 15 million barrels a day (b/d) short in the market. Crude gets the headline but the actual impact is further downstream in refined products, diesel, jet, fuel or naphtha. There are 68 refineries in the war zone.”
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