Qatar halts LNG output prompting biggest gas rally since 2022

[DOHA] Qatar shut down production of liquefied natural gas from the world’s biggest export plant after it was targeted in an Iranian drone attack, sending European gas prices soaring more than 40 per cent.

The unprecedented move marks a steep escalation in the conflict that now threatens global energy security. QatarEnergy said production had halted in a statement on Monday (Mar 2).

European benchmark gas futures surged as much 50 per cent, the biggest daily jump in nearly four years. The move fans fears of major disruption to global energy supplies, with tankers largely stopping their trips through the Strait of Hormuz. It’s a key shipping route for energy, carrying about a fifth of the world’s liquefied natural gas exports. Oil also rose sharply.

While Asian countries buy most of the LNG shipped from the Middle East, any disruption would increase competition for alternative supplies – pushing up prices worldwide, including in Europe.

“The price shock of the loss of Middle East LNG is estimated to be similar to the price shock in 2022, following the Russian invasion of Ukraine,” said Mike Fulwood, a senior research fellow at the Oxford Institute for Energy Studies. This “could have dire consequences for government budgets in Europe and Asia.”

Meanwhile, more than half of the world’s largest maritime insurance clubs will cease covering war risks for ships entering the Persian Gulf starting on Thursday, Bloomberg reported. The removal of the insurance will likely dent risk appetite for those looking to load cargoes from within the Persian Gulf. 

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US President Donald Trump said in an interview with the New York Times that he intends for the bombardment of Iran to continue for the next four to five weeks. 

A month-long halt to shipping through Hormuz could cause European gas prices to more than double, according to Goldman Sachs Group. That would mark a significant shock for the market after benchmark futures dropped 19 per cent last month, thanks to relatively mild weather and ample supply. BLOOMBERG