By Giulia Petroni
Oil and gas prices surged on Friday after Israel launched a wide-ranging attack against Iran, shaking global markets and stoking fears of a regional conflict that could severely disrupt global energy flows.
In midday European trade, Brent crude soared 8.8% to $75.47 a barrel, while the U.S. oil gauge West Texas Intermediate gained 9.2% to $74.25 a barrel. Prices surged as much as 13% overnight. The European benchmark price for natural gas, the Dutch futures contract TTF, was up 5.6% to 38.21 euros a megawatt hour.
Israeli strikes targeted Tehran's nuclear facilities and military leadership, prompting a retaliatory response from Iran, though oil infrastructure wasn't damaged by a barrage.
However, traders are particularly concerned that hostilities could disrupt shipments through the Strait of Hormuz, where around 25% of seaborne global oil supplies and 20% of global liquefied natural gas transit. Iran, a major oil producer and member of the Organization of the Petroleum Exporting Countries, holds a strategic position on the northern side of the strait.
"While there are no reports of disruptions to oil supply, the market needs to start pricing in a larger risk premium," said Warren Patterson, ING's head of commodity strategy. "What impact this would have on the oil market depends on whether downstream assets are affected or if midstream and upstream assets are targeted."
Any disruptions to Iranian oil supply could prompt OPEC to ramp up production more quickly. However, its ability to cushion the market would likely be limited if tensions escalate further.
"Crucially, one way in which this occasion differs from previous flare-ups between Israel and Iran is that the potential supply buffer provided by spare capacity within OPEC+, which has helped to insulate the oil market from bad news in recent years, is already in the process of being drawn down," senior economists at Capital Economics said.
Disruptions to shipping through the Strait of Hormuz would also have a significant impact on the global liquefied natural gas market. Any halt to flows, especially from Qatar, could push TTF prices back to 100 euros a megawatt hour, according to Rabobank's energy strategist Florence Schmit.
Securing LNG supplies will be even crucial to Europe in the coming months as the region scrambles to restock depleted inventories ahead of the winter season following the loss of Russian piped gas supply.
Israel's strikes also come just days before U.S. special envoy Steve Witkoff was due to meet his Iranian counterparts in Oman for a sixth round of nuclear talks.
"President Trump has recently become more skeptical about an agreement, and the Iranian defense minister has threatened to attack U.S. bases in the region if the negotiations fail and a conflict is forced upon Iran," analysts at Commerzbank Research said. "The risk of this has increased significantly since today, even if the U.S. was not directly involved in the Israeli attacks."
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
June 13, 2025 06:48 ET (10:48 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
