Israel attacks Iran's gas facilities, fuelling fears of wider energy war

Israel attacks Iran's gas facilities, fueling fears of wider energy war

A weekend series of Israeli strikes on Iran's main oil and gas facilities set alarm bells ringing over regional energy disruption and increased market volatility. The Iranian and international sources confirmed the attacks, which hit two gas processing plants on Iran's southern coast, supplied by the gigantic South Pars gas field, and several fuel depots in Tehran, the Financial Times said.

Target: South Pars and fuel depots

Israel's attacks targeted disrupting Iran's domestic energy supply rather than its crude exports. The two gas processing facilities targeted are tapping South Pars, the globe's largest gas field, shared with Qatar. One offshore platform suspended operations temporarily, while Iran's state-run Shana news agency reported that the situation was "under control" and play down damage to storage tanks in Tehran.

Targets in north and south Tehran were struck, including the Shahran depot, but the fuel levels at the time were reported to be low. Other significant targets, the Tabriz refinery and the Shahid Tondguyan petrochemical complex, were spared, authorities said.

Strategic disruption, not market shock—yet

Analysts are saying the strikes were aimed at reducing Iran's internal energy logistics rather than impacting export capacity. Iran's largest oil refinery at Abadan, which handles 500,000 barrels a day, was left unscathed. That could be why oil markets have not yet responded, the next trading window opening Monday in Asia.

But the general implication is troubling. By striking at energy facilities, Israel has brought a dispute into an industry essential to international stability. The threat of Iranian retaliation against Gulf state infrastructure or merchant shipping through the Strait of Hormuz has now risen.

Hormuz fears return

Approximately one-third of the globe's maritime oil travels through the Strait of Hormuz. Any Iranian effort to cut this path might precipitate a significant supply shock. While specialists regard complete closure as improbable—considering the effect on Iran's own partners and consumers such as China—exigent ship confiscations or threats are conceivable. Iran has already taken ships, as with the MSC Aries in April 2024, citing Israeli connections.

Israel's vulnerabilities exposed

Iran has already responded with missile attacks on Israel's Bazan refinery in Haifa, destroying transmission pipelines. While the main refinery is still operational, some downstream units have been closed. Bazan's share price fell 1.3% on the news.

In response to the increased threat, Israel preemptively shut down its Karish and Leviathan gas fields. These are critical to Israel's energy security, as the nation gets 70% of its power from natural gas and has no electricity interconnection with neighbours.

Though there is no direct effect on world oil exports yet, the attacks mark a pernicious escalation of the Israel-Iran war into the energy realm. Markets will likely stay calm in the near term, but if Iran were to upset Gulf flows or attack regional infrastructure, it could shock oil prices and expand the crisis.