Damage to Qatar’s Ras Laffan liquefied natural gas (LNG) facility could reduce global LNG output by 12.8 million tons over the next three to five years, according to QatarEnergy, the country’s state-owned energy operator.

The strikes, carried out by Iran, have already pushed UK gas prices up significantly, with a rise as large as 11.3% seen yesterday.

Smaller businesses likely to be hit hard by oil price hikes

Qatar supplies roughly a fifth of the world’s LNG, and Ras Laffan is its primary export terminal. A disrupted supply chain and increased energy costs are likely to hit small and medium businesses hard, given they are not able to compete with larger conglomerates in the purchasing power department.

Nick Butler, former head of strategy at BP, told the BBC that the strike on Ras Laffan would “almost certainly cut off a level of supply of LNG to the world market.” Butler added that replacement supply could not be found quickly, and possibly not for a very long time, which would continue to push prices upward.

The consequences extend beyond the energy bill. The FTSE 100 fell 256 points to close at 10,049, while yields on two-year UK government gilts recorded their largest single-day rise since the Liz Truss mini-budget in September 2022. A fragile consumer economy will again have wider ramifications for small businesses as the consumers feel the squeeze too.

Meanwhile, Brent crude peaked at $119 a barrel before settling just above $108, in line with the global upward trend.

US Treasury Secretary Scott Bessent said the US was considering suspending sanctions on approximately 140 million barrels of Iranian oil already at sea, as part of broader efforts to moderate prices. Washington has also moved to ease sanctions on Russian oil and relax domestic shipping rules. However, earlier coordinated releases from strategic reserves have done little to bring prices down.

Iran has simultaneously suspended gas flows to Iraq, according to a senior Iraqi official cited by Reuters, diverting supply to meet domestic demand. The Gas Exporting Countries Forum estimates that 94% of Iran’s gas output is consumed internally.

Iranian Foreign Minister Abbas Araghchi said his country would show “zero restraint” if its own infrastructure came under further attack.

Image Credit: Unsplash