(Bloomberg) – Qatar has stopped producing liquefied natural gas (LNG) at the largest export facility in the world after it was hit by an Iranian drone attack. This has caused European gas prices to spike by over 50%, unsettling global energy markets.
The Ras Laffan plant, operated by QatarEnergy, accounts for about 20% of the global LNG supply. Its sudden closure is now posing threats to global energy security.
European gas futures rose sharply, experiencing their largest increase since the energy crisis of 2022, following QatarEnergy's confirmation on Monday of the output halt. Meanwhile, shipping through the Strait of Hormuz, a vital route for global fuel transport, has significantly declined.
Simone Tagliapietra, an analyst at Bruegel, stated, “The threat to security of supply is real right now. The impact will depend on how long the shutdown lasts, but we are entering a new situation.”
Although Asian countries primarily import LNG from the Middle East, any disruptions will create more competition for alternative energy supplies, driving prices up worldwide, including in Europe.
European gas prices are surging partly because storage levels are unusually low. The region needs to import significant amounts of LNG this summer to replenish stocks for the next winter. While recent price increases are the highest since Russia's invasion of Ukraine four years ago, prices are only at a yearly peak because regional supplies have not been directly affected yet, and traders are still trying to gauge the duration of the conflict.
The Strait of Hormuz is crucial for energy transportation, as it carries about 20% of the world’s LNG. The slowdown in traffic through this strait has caused significant bottlenecks, leading to fuller storage tanks for QatarEnergy. The company has declared force majeure on its contracts to supply LNG to its customers, although reports indicate that there haven't been any damages at the facility so far.
Traders are uncertain about the length of this disruption. If shipping through the Strait of Hormuz stops for a month, Goldman Sachs Group Inc. predicts that European gas prices could more than double.
Though the U.S. is expected to increase LNG production, it may not be enough to make up for Qatar's supply shortfall in the near future. QatarEnergy is set to begin its Golden Pass expansion project in the U.S. soon, but it won’t reach full capacity until next year.
U.S. President Donald Trump mentioned that the bombing campaign against Iran might continue for weeks. The ongoing conflict has intensified, with explosions reported in Israel, Saudi Arabia, Qatar, and the United Arab Emirates, as they intercepted Iranian missiles in retaliation for U.S.-Israeli strikes.
On Saturday, Israel temporarily closed some gas production facilities, including its largest Leviathan gas field, leading Egypt, a major importer, to seek more LNG shipments.
Furthermore, disruptions in gas trade in the Middle East could also increase demand for spot LNG from Turkey, which imports pipeline gas from Iran, according to BloombergNEF.
Dutch front-month futures, the European gas benchmark, surged by 46% to €46.77 per megawatt-hour by 2:31 PM in Amsterdam, marking the highest level since February 2025.