Iran’s attacks on energy infrastructure are driving up oil and gas prices. The chaos may end up benefiting Russia.
Amid the war in the Middle East, Iran has been targeting key energy infrastructure across the region. Tehran is also threatening energy exporters, warning that tankers entering the Strait of Hormuz — a narrow, near-irreplaceable artery for Middle Eastern supplies — will come under attack. The strategy of sowing disruption appears to be working: oil and gas prices have surged, major facilities have shut down temporarily after drone strikes, and the Strait of Hormuz has become a “dead zone” for shipping. But the turmoil in global energy markets could ultimately play into Moscow’s hands.
Will oil hit $100 a barrel?
Oil prices are continuing to climb. On March 3, May futures for Brent crude rose to nearly $85 a barrel. That represents nearly a 10 percent increase from the close of trading on March 2, when prices — on the first trading day after the weekend during which the war broke out — jumped from $73 to nearly $80 per barrel.
Analysts link the latest spike to a statement by Iran’s Islamic Revolutionary Guard Corps announcing the closure of the Strait of Hormuz. Iran’s main security force threatened to attack any vessel attempting to pass through the waterway. U.S. military sources say Tehran lacks the resources to patrol the strait effectively, and that there’s no evidence it has mined the area. But few shipping companies are willing to test how accurate Iranian drones and missiles might be. At least three vessels have already been hit. According to specialized tracking services, as of the morning of March 3, not a single tanker was in the Strait of Hormuz, while hundreds were clustered near its entrances, The Bell reported.
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Whether oil reaches the $100-per-barrel mark — a scenario some analysts outlined on the first day of the war — will depend on how long this current phase of escalation lasts. Iran has been expending missiles and drones in strikes across the Gulf, apparently hoping to draw regional states into the conflict, if only as advocates for renewed peace talks. It remains unclear how long Tehran’s stockpiles can sustain pressure strong enough to deter tankers from entering the strait. Even a short-term blockade, however, could send prices as high as $108 per barrel, according to analysts from Bloomberg Economics.
The threat isn’t limited to shipping. Iranian strikes are also rattling the oil market by raising the risk of direct hits on key infrastructure. On March 2, Saudi Arabia’s energy giant Saudi Aramco preemptively suspended operations at a refinery with a capacity of 550,000 barrels per day and began urgently attempting to redirect part of its exports along alternative routes, including pipelines and shipments through the Red Sea.
Analysts at JPMorgan warn that if the United States fails to eliminate the threat to shipping in the Strait of Hormuz, major Middle Eastern oil producers led by Saudi Arabia could face storage shortages within a month, forcing them to cut output.
Why are gas prices rising faster than oil prices?
For the gas market, the war has delivered an even sharper shock than it has for oil. Not only does as much as 20 percent of the world’s seaborne liquefied natural gas (LNG) exports pass through the Strait of Hormuz, but Iran’s strategy of dispersed strikes has also temporarily disrupted infrastructure in Qatar — the world’s largest LNG producer.
On March 2, Qatar’s Defense Ministry and the state-owned energy company QatarEnergy confirmed that two Iranian drones had struck targets in the country. One damaged a water tank at a power plant in Mesaieed, south of Doha. The other hit an energy facility at Ras Laffan, Qatar’s main LNG terminal. With an annual production capacity of 77 million tons, Ras Laffan accounts for nearly one-fifth of global LNG supply. Even a temporary shutdown poses risks of supply disruptions for more than 120 countries.
The result has been what market observers describe as a “perfect storm.” On March 2, gas futures at the TTF hub surged nearly 50 percent in a single day, reaching 46–47 euros per megawatt-hour. The market has not seen such a one-day spike since Russia’s full-scale invasion of Ukraine in February 2022. The sharp rise in LNG prices is likely to hit import-dependent regions first and hardest.
Europe is especially exposed. After cutting pipeline gas imports from Russia, E.U. countries have grown more reliant on LNG. The level of liquefied gas purchases determines how full the region’s underground storage facilities are — reserves that Europe draws on in winter. Today, storage levels across the E.U., including in major economies such as Germany and France, are below target. Higher LNG prices will force member states to absorb greater costs and could accelerate inflation while slowing overall economic growth.
According to analysts at Goldman Sachs, if the United States and Israel fail to secure safe passage for tankers through the Strait of Hormuz within a month, gas prices in Europe could rise by 130 percent. Should the crisis drag on for two months, prices could climb above 100 euros per megawatt-hour.
Will Iran close the Strait of Hormuz?
It’s unclear how long Iran can credibly threaten shipping in the Strait of Hormuz. The Bell notes that, according to experts, Iran likely has sufficient resources to mount a short-term blockade of the strait and pose a missile threat to U.S. ships should they attempt to clear the area. A lower-cost campaign relying on drone strikes could potentially continue for months.
U.S. forces are targeting facilities that produce drones and short-range ballistic missiles. However, if those strikes fail to neutralize the threat, tankers would have to transit the strait under naval escort.
What does Russia stand to gain?
From the outset, Russia’s potential benefits from a Middle East war were clear. Analysts at the research firm Kpler suggest that Moscow’s gains could extend beyond higher revenues from rising prices. The conflict may also accelerate a reorientation of China and India toward Russian energy supplies.
India, under pressure from the administration of Donald Trump, had reduced its imports of Russian oil in recent months — but that trend could easily reverse. In the short term, the United States may prioritize stable supplies to the world’s largest energy consumers over efforts to curb Kremlin revenues.
China, for its part, has already used Russian crude to offset lost imports from Venezuela. As a result, shipments of Russian oil to China rose in February compared with January.
That said, Reuters notes that the steep discount on Russian crude means it still sells for less than the level Moscow needs to balance its budget.
Gas could also help shore up state revenues. According to Ana Maria Jaller-Makarewicz, an analyst at the Institute for Energy Economics and Financial Analysis, a halt in LNG production in Qatar could push affected buyers toward Russian supplies. BBC News Russian has also reported that pipeline deliveries to Europe could increase.
The European Union, meanwhile, appears prepared to press Ukraine to speed up repairs to the Druzhba pipeline. The Druzhba pipeline is the only remaining route for Russian oil exports to the E.U., supplying Hungary and Slovakia. Transit was suspended in late January after Ukraine said Russian drone strikes damaged part of the line; Hungary and Slovakia, however, accused Ukraine of sabotage.