Global oil prices will leap past their 2008 record highs in the coming weeks if the US-Israel war on Iran continues and the Strait of Hormuz remains closed, according to energy analysts.
The regional conflict has thrown global energy markets into turmoil after Tehran's retaliatory strikes effectively sealed off the Strait of Hormuz and vital infrastructure on both sides of the Arabian Gulf comes under fire.
The strategic waterway carries around 20 percent of the world's oil and gas supply and Gulf producers have begun to slash production as storage reaches full capacity.
The shock has removed as many as 11 million barrels of oil per day from the market in what the International Energy Agency has described as the "largest supply disruption in history".
The disruption has sent regional prices to near record levels, and though Western benchmarks have lagged behind, analysts say that rising shortages will soon see them shoot above their 2008 highs, even as governments try to contain the crisis.
"If the conflict stretches beyond three to four weeks while the strait remains closed, the shortage will become materially visible in the physical market and hard to ignore," Natalia Katona, a UAE-based commodities analyst, told The New Arab.
"Under such circumstances, Brent could move into the $150-200 barrel range."
Oil prices have swung violently this month, with Brent surging past $118 on Thursday as Israel and Iran ramped up attacks on energy facilities across the region.
Countries across the world have responded with emergency measures in a bid to supply the market. The US has waived sanctions on Russia and seaborne Iranian crude while IEA member states have agreed to release 400 million barrels – enough to cover around a month of shortfall.
But these are unlikely to be enough to soften the blow should the conflict drag on, even if governments further draw down their stockpiles.
"Further releases would likely arrive in smaller volumes over a prolonged period, which means they cannot fully offset a sustained disruption," Katona said.
Meanwhile, intensifying attacks on energy infrastructure have further stoked concerns about the long-term damage being inflicted on the global energy market.
An Iranian missile attack on Qatar's critical Ras Laffan gas complex this week erased almost a fifth of the country's liquefied natural gas capacity for as long as five years.
"If attacks on energy infrastructure persist, prices will go higher, potentially as high as $150-160 per barrel," Homayoun Falakshi, an oil analyst at market intelligence firm Kpler, told The New Arab.
The prospect of a prolonged conflict will put further pressure on the market, which currently expects the war to end by early April.
"If the market realises that the war may last longer, then the door is open for prices to go much higher, and that's where we'll see Brent going to $150-180," he said.
IEA head Fatih Birol warned on Friday that restoring Gulf energy flows to pre-war levels could take at least six months, warning that the world is facing the most severe energy crisis in history.
Red Sea lifeline
With the Strait of Hormuz off limits, Arab Gulf producers are scrambling to find alternative export routes.
Saudi Arabia has diverted millions of barrels to the Red Sea while the UAE is now fully reliant on Fujairah on the other side of the strait to export.
The Iraqi government, which began to shutter some of its oil fields early in the war, this week hatched a deal with the autonomous Iraqi Kurdistan region to resume shipments via Turkey.
But these routes, too, are vulnerable to Iranian attack. Shipments via Fujairah have plummeted in recent days following several attacks on the port.
Of even greater importance is Saudi Arabia's Red Sea port at Yanbu, where oil shipments have almost trebled since the start of the war.
A drone attack at a refinery in the city on Thursday raised fears that Iran could try to shut down Red Sea trade and sever a vital remaining link between Saudi Arabia and the global market.
"If Yanbu is hit durably, the supply disruption would be a lot larger," Falakshi said.
"We currently assess the lost barrels at around 10-11 million barrels per day, and this could jump to 14-15 million [if Yanbu closes]."
'Unprecedented' gas prices
Global gas prices have surged this month after Qatar- the world's largest LNG supplier – shuttered gas production in response to the closure of the Hormuz strait.
European gas prices rose another 30 percent on Thursday after Iran struck Ras Laffan in retaliation for Israel's attack on the giant South Pars gas field.
QatarEnergy said the "extensive damage" at the complex will take years to repair and declared force majeure on five-year contracts to several Asian and European countries.
"The gas market arguably looks even more fragile," Katona told The New Arab.
"Qatari authorities have already indicated that the recent strike on Ras Laffan could force a production reduction of roughly 20% from pre-war levels. Given Qatar’s role as the world’s largest LNG exporter, such a cut would immediately reverberate through global gas markets."
Europe is likely to be particularly hard by the crisis. Countries are competing with higher prices in Asia to fill their reserves, which have fallen to their lowest levels since 2022.
"Gas prices could reach unprecedented levels if Qatari long-term supply becomes constrained and buyers are forced into the spot market," Katona said.