What the Middle East conflict means for oil, LNG and the global economy

The global economy is shaking off the shocks that have rocked growth over the past few years. But a return to stability is far from complete or certain. The potential for a further escalation of conflicts in the Middle East means oil prices could see an increase up to USD $100 or even USD $125 per barrel depending on how events unfold. 

In our recent webinar, What the Middle East conflict means for oil, LNG, and the global economy, we analysed the latest escalation of the conflict in the Middle East. We explore the content of this webinar below.

To access the extended version of this article or watch the full webinar from 10 October, please fill out the form at the top of the page.

Keeping oil routes open

While the conflict significantly affects localised economies, broader disruptions could occur if larger Middle Eastern economies are drawn into the conflict. Trade and market channels can propagate the impacts globally.  

The potential closure of the Strait of Hormuz - a crucial route for oil exports – could cause significant disruption to global oil trade.

While Saudi Arabia could reroute up to 5 million barrels a day through its east-west pipeline to the Red Sea, and the UAE has a 1.5 million-barrel-per-day pipeline bypassing the Strait, a large portion of oil exports would be trapped.

Regionally, there is significant risk if Israel targets Iran's oil infrastructure, in particular Kharg Island, which could disrupt 90% of Iran's oil exports. Iran produces 3.2 million barrels a day and exports 1.4 – 1.5 m, most of which goes to China.

[sub-title] Maintaining LNG

Although the Middle East’s significance in the gas market is lower than its role in oil, there are still risks.

Any disruptions in the region’s gas exports would have a limited effect on global gas markets, but Qatar accounts for around 20% of the global LNG trade annually - especially from the Strait of Hormuz. Despite Qatar's relatively stable relations with Iran, and its crucial role in the LNG sector, the possibility of disruptions cannot be completely ruled out if conflict escalates in the region.

Iran, the region's largest gas producer, consumes most of its gas domestically but if Israel targets its gas infrastructure, it could severely damage Iran’s production and economy.

With about 10 bcm per year going to Egypt and Jordan, any targeting of Israel's gas production and infrastructure, would cause significant damage to Israel’s gas exports.

Fill in the form above to gain access to the full version of this article, where we discuss :

• The conflict’s impact on gas supply growth
• Impact in China, US, EU and Asia
• Influence on Russia
• Diplomatic manoeuvrings