Impact of Israel-Iran Conflict on Global Energy Markets

According to a recent report from Reuters,the ongoing conflict between Israel and Iran has already begun to affect critical energy infrastructure in both nations. While we haven’t seen the worst-case scenarios unfold just yet, the war is noticeably disrupting energy production and exports. Following a series of unprecedented airstrikes by Israel on Iran, Brent crude oil prices surged by 7%, surpassing $74 per barrel as Tehran retaliated with ballistic missile strikes.

In the days that followed, some energy facilities in both countries sustained damage, leading to meaningful production interruptions. However, prices dipped slightly on Monday as it became clear that neither side was targeting key energy infrastructure or supply routes directly. Additionally, reports emerged indicating that Iran was open to ceasefire negotiations.

The Strait of Hormuz remains a focal point for investors; this narrow waterway is crucial for global oil transport—about 18-19 million barrels per day pass through it, representing nearly 20% of worldwide consumption. Last year alone saw around 85 million tons of liquefied natural gas from Qatar and the UAE traversing this strait. Any disruption here could send oil and gas prices soaring into triple digits.

While we haven’t reached a doomsday scenario yet, disruptions have been significant for both nations’ energy sectors. Notably, Iranian oil exports have plummeted recently; projections suggest they may only reach about 102,000 barrels per day this week compared to an average of 1.7 million earlier this year according to analytics firm Kpler. Exports from Kharg Island—responsible for over 90% of Iranian oil shipments—have reportedly ceased entirely since Friday.

Despite these setbacks, iran still has approximately 27.5 million barrels stored in tankers outside the Gulf which could sustain sales temporarily.The U.S Energy Details Administration indicates that Iran produced an average of about 3.4 million barrels per day so far in 2025 with China being its primary buyer.On Israel’s side, there have also been direct attacks on Iranian energy assets; notably on Saturday when gas production at South Pars—a massive field shared with Qatar—was partially suspended due to Israeli strikes targeting its oil sector operations.

South Pars is vital as it produces around 610 million cubic meters daily and accounts for roughly 80% of Iran’s total gas output while also yielding condensate used in fuels and petrochemicals production at refineries like Persian Gulf Star.

Israel’s own energy landscape has taken hits too; two out of three offshore natural gas fields were shut down last Friday due to escalating tensions—the Leviathan field operated by Chevron and Energean’s Karish field—which slashed israel’s supply significantly while Tamar continues operations but will require coal or fuel oils as substitutes now.

This disruption affects not just local markets but extends beyond borders: Israeli gas typically meets about 15-20% of Egypt’s consumption needs according to data from JODI (Joint Organisations Data Initiative).The halt in Israeli supplies forced Egyptian fertilizer producers into shutdowns last week due to lackluster access to necessary resources.

Moreover,Haifa’s ORL refinery announced complete shutdowns after sustaining damage from an Iranian missile strike aimed at its power station essential for steam generation needed during refining processes.

As tensions continue between these two nations without any immediate resolution insightfully visible ahead—it remains uncertain how long hostilities will persist or what their ultimate impact might be on global energy markets if peace isn’t swiftly restored.