Oil prices could surge to US$120 per barrel if Iran carries out threats to strike five major energy facilities across Saudi Arabia, the United Arab Emirates (UAE), and Qatar.
Rystad Energy senior vice-president Aditya Saraswat noted that Asia is expected to face the most significant impact due to its heavy reliance on Qatari energy supplies.
According to Saraswat, a successful strike would not only disrupt refined product output but also jeopardize the operational continuity of liquefied natural gas (LNG) plants.
These plants currently supply Europe, Japan, South Korea, and China under various long-term contracts.
The warning from Iranian authorities suggests that facilities across the three nations are being targeted in response to recent attacks on Iran’s South Pars offshore natural gas field. Currently, oil prices have already climbed above US$110 per barrel, driven by heightening Middle East tensions and risks surrounding the Strait of Hormuz.
Potential for massive supply disruptions
Market analysts estimate that at least 700,000 barrels per day of refined product capacity could be removed from global markets almost instantly if the specified facilities are hit. This would lead to immediate shortages in the supply of diesel, jet fuel, and naphtha.
The high-risk locations include the SAMREF refinery and Jubail petrochemical complex in Saudi Arabia, the Al Hosn gas field in the UAE, and the Ras Laffan refinery alongside the Mesaieed petrochemical complex in Qatar.
Saraswat emphasized that Iran has historically followed through on its stated actions, making the current threat highly credible for global markets.
Collectively, these five facilities represent approximately 20% of the global LNG trade. Furthermore, they account for up to 10% of naphtha imports in the Asia-Pacific region and more than 6% of the world’s total polyethylene capacity.
Risks to global shipping and price ceilings
While previous strikes in Saudi Arabia have occurred without affecting oil loadings, the current situation remains critical for market stability. Any significant disruption to essential infrastructure, such as the port of Yanbu, could have even more dire consequences for the global economy.
Such an escalation could potentially remove between five million and six million barrels per day from the global supply chain.
Under these circumstances, experts warn that oil prices could be pushed to US$150 per barrel or even higher, causing a massive ripple effect across international trade and transportation sectors.
