Cover Story: War in the Gulf Triggers Global Energy Shock
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The war in the Middle East, which is entering its fourth week, has opened a dangerous new front: the region’s energy system.
What began as a fast-moving military confrontation has escalated into direct strikes on oil and gas installations across the Gulf, damaging capacity in a region that supplies roughly a quarter of the world’s oil and gas.
The fallout is already reverberating beyond the battlefield. Oil and gas prices have rocketed in volatile trading, rippling through equities, commodities, currencies, inflation expectations and supply chains. What is unfolding is no longer simply a regional security crisis, but a broad economic shock with global consequences.
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- Middle East conflict has severely disrupted oil and gas flows, with Iranian attacks cutting Qatar’s LNG exports by 17%, halting Strait of Hormuz traffic, and pushing Brent crude prices above $110/barrel.
- Global supply chains are strained; Asia faces shortages and price spikes, with some countries increasing coal use, while the IEA released 400 million barrels from reserves to mitigate supply shocks.
- The crisis is reshaping energy transition strategies, reinforcing the role of fossil fuels while accelerating renewable investments; China remains resilient due to high self-sufficiency and diverse imports.
1. The ongoing war in the Middle East, now in its third week, has significantly escalated by targeting the region's energy infrastructure, particularly in the Gulf—a region responsible for about 25% of global oil and gas supply. Military confrontations have evolved into direct attacks on oil and gas facilities, causing substantial damage, and the resulting market volatility is impacting global equities, commodities, currencies, and inflation expectations, transforming the conflict from a regional security issue into a broader economic shock with global ramifications. [para. 1][para. 2][para. 3]
2. A crucial focus is the Strait of Hormuz, which before the conflict handled nearly 30% of global seaborne oil trade and about 20% of liquefied natural gas (LNG) flows. As attacks intensified, shipping through the strait essentially ceased, disrupting oil, gas, and commodity flows with few alternatives available, thereby heightening fears of stagflation as markets are jolted by the supply interruptions. [para. 4]
3. The shock escalated on March 18, when Iranian missile strikes hit multiple LNG facilities at Ras Laffan Industrial City, Qatar, reducing the country’s LNG export capacity by 17%, which translates to potential annual losses of $20 billion and a repair timeline of 3-5 years. Subsequent Iranian drone attacks struck energy infrastructure in Saudi Arabia, the United Arab Emirates (UAE), and Kuwait, further intensifying supply risks and underscoring energy systems as key targets in the widening conflict. [para. 5][para. 6][para. 7]
4. These attacks have triggered panic in energy markets: Brent crude futures spiked as much as 6.6% intraday to $112 a barrel (over 40% above prewar levels), while European and Asian LNG benchmarks jumped by 91% and 108%, respectively. Sustained high prices could significantly slow global GDP growth—Wood Mackenzie projects global GDP could drop from 2.5% to 1.9% at $90/barrel and to 1.3% at $125/barrel. [para. 8][para. 9][para. 10]
5. The disruption has already reduced Gulf oil exports from eight countries by about 60% in March compared to February. According to Goldman Sachs, if the Strait of Hormuz remains closed for two months, economies of Qatar and Kuwait could contract by 14% each, the UAE by 5%, and Saudi Arabia by 3%. The supply crunch is forcing refiners in Asia to cut runs by about 20%, while countries scramble for alternative sources—including Russia and eased U.S. sanctions have enabled India to buy 30 million barrels in a week. [para. 12][para. 13][para. 14][para. 15]
6. The supply shock extends beyond fuel markets to fertilizers and food, with threatened shipments of urea, phosphates, and sulfur risking global food price hikes of 10%-30%. The International Energy Agency coordinated a record release of 400 million barrels from strategic reserves to mitigate the impact, but U.S. inflation has still jumped, with gasoline and natural gas prices up 30% and 9% respectively. [para. 17][para. 18][para. 19][para. 20][para. 21]
7. Policy options are limited; U.S. moves to ease sanctions on Russian and possibly Iranian oil and strategic reserve releases are only partial solutions. About 20 million barrels flow daily through Hormuz, volumes not easily replaced, so a persistent blockade could deepen the oil shortfall and further damage the global economy. [para. 22][para. 23]
8. Asia is disproportionately affected, with countries such as India, Australia, and Southeast Asia facing acute shortages due to reliance on Middle Eastern imports, limited reserves, and higher exposure to energy price spikes. Emergency measures include university closures in Bangladesh and working hour reductions in the Philippines; even developed nations like Japan and South Korea are imposing subsidies and price caps. [para. 25][para. 26][para. 27][para. 28]
9. The turmoil has prompted a global reassessment of energy strategies. Europe and Japan are reconsidering expansion of nuclear power, while higher fossil fuel prices are simultaneously driving investment in renewables and a rethink of energy security. However, many countries—including India and the Philippines—are also turning back to coal to offset reduced LNG supplies, with Asia expected to increase thermal coal imports by 8%-10%. [para. 32][para. 33][para. 34][para. 35][para. 36][para. 37][para. 38]
10. China, as the world’s biggest energy producer and consumer, demonstrates strong resilience due to its high self-sufficiency in coal (over 90%) and significant strategic reserves (1.5 billion barrels of oil). Its diverse import sources and rapid adoption of renewable energy have insulated it from the worst supply shocks, though price risks persist. The crisis is accelerating China’s push for renewables while maintaining coal as a stability anchor, highlighting the necessity of oil and gas as a backstop in a diversified energy system. [para. 41][para. 42][para. 43][para. 44][para. 45][para. 46][para. 47]
- Qatar Energy
- Qatar Energy, the world's largest LNG producer, operates multiple LNG facilities at Ras Laffan Industrial City. These facilities were hit by Iranian missiles on March 18, causing significant damage and large fires. The attack reduced Qatar's LNG export capacity by 17%, leading to estimated annual revenue losses of $20 billion and a repair timeline of three to five years. Supplies to China, South Korea, Italy, and Belgium are expected to be affected.
- Kuwait Petroleum Corp.
- Kuwait Petroleum Corp. (KPC) is mentioned in the context of being targeted during the ongoing conflict in the Middle East. Specifically, two of its three refineries were struck by Iranian drones on March 19, amidst a series of attacks on critical oil and gas infrastructure in the region.
- Wood Mackenzie
- Wood Mackenzie is a global energy consultancy mentioned in the article. They estimate that if annual average oil prices reach $90 per barrel, global GDP growth could fall from 2.5% to 1.9%, and to 1.3% at $125 per barrel. Sushant Gupta and Allen Wang from Wood Mackenzie also contributed insights on Asia's energy landscape and the world's reevaluation of energy security.
- Goldman Sachs
- Goldman Sachs estimates that if the Middle East conflict persists into April and disrupts the Strait of Hormuz for two months, the economies of Qatar and Kuwait could each contract by 14%. The UAE could shrink by 5%, and Saudi Arabia by 3%.
- GL Consulting
- GL Consulting is an organization whose general manager is Liao Na. Liao Na commented on the impact of sustained oil prices above $100 a barrel, noting that such prices would be difficult for the "Donald Trump administration" to tolerate, as rising inflation has already triggered a sell-off in equities.
- Sinochem Energy
- Wang Haibin from Sinochem Energy states that easing sanctions on Russian (and potentially Iranian) oil, coupled with reserve releases, offers only partial solutions. They emphasize that the 20 million barrels passing through the Strait of Hormuz daily are difficult to replace. Wang warns that a persistent disruption in Hormuz would deepen the global oil shortfall over time.
- Morgan Stanley
- Morgan Stanley's chief China economist, Xing Ziqiang, noted at a March 16 briefing that Asia is a significant victim of the energy crisis. Additionally, analyst Zhang Lei estimated that if Qatar's LNG exports remain constrained, Japan, South Korea, and Taiwan could increase monthly thermal coal imports by 8% to 10%, while South Asian demand could also rise.
- Bernstein Research
- Bob Brackett, from Bernstein Research, is quoted in the article. He notes that the current crisis is prompting buyers to recognize that diversification enhances security. He anticipates a "long cycle" of developing more resilient, albeit less efficient and more redundant, supply chains.
- China National Aviation Fuel Group
- China National Aviation Fuel Group (CNAF) is a Chinese state-owned enterprise that plays a significant role in China's jet fuel supply. After a recent war began, CNAF, according to a source close to the group, implemented a ban on jet fuel exports. This action contributed to a shortage of imported jet fuel in countries like Vietnam, which relies on imports for over two-thirds of its jet fuel, with 60% historically coming from China and Thailand.
- China National Offshore Oil Corporation Research Institute
- Chen Weidong, former chief researcher at the China National Offshore Oil Corporation Research Institute, highlighted that the recent conflict serves as a reminder of the indispensable role of oil and gas. He also noted China's strong energy resilience amid global turmoil, with an 83.1% energy self-sufficiency rate.
- Early March 2026：
- Oil exports from eight countries including Saudi Arabia, Kuwait, and the UAE fell about 60% from February 2026 averages.
- March 3, 2026：
- Liquefied natural gas production facilities in Ras Laffan Industrial City, Qatar, observed as normal before the major attacks.
- March 11, 2026：
- The International Energy Agency announced the largest coordinated release of strategic petroleum reserves on record, totaling 400 million barrels.
- March 16, 2026：
- Morgan Stanley’s chief China economist, Xing Ziqiang, briefed on Asia's acute impact from the energy crisis; motorists in Colombo, Sri Lanka, queued to refuel amidst shortages.
- March 18, 2026：
- Iranian missiles hit multiple LNG facilities at Ras Laffan Industrial City operated by Qatar Energy, causing extensive damage and fires, cutting Qatar’s LNG export capacity by 17%. This was retaliation for an Israeli strike earlier the same day on Iran’s South Pars gas field.
- March 19, 2026：
- Iranian drones struck Saudi Arabia’s Samref refinery and Riyadh refinery, the UAE’s Bab oil field and Habshan gas facilities, and two of Kuwait Petroleum Corp.’s three refineries. On the same day, Brent crude futures jumped as much as 6.6% intraday to $112 a barrel.
- After March 18, 2026：
- Iran widened its warning, declaring oil facilities in Saudi Arabia, the UAE, and Qatar as legitimate retaliation targets.
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