Oil surges after Israeli strikes on gas field and Iran’s Gulf threat

• South Pars field hit by Israel
• Tehran vows to retaliate in Gulf
• Brent crude rises to $109

Oil prices surged to a nine-day high on Wednesday after Israeli strikes on Iran’s energy infrastructure led Tehran to warn it would attack Gulf oil facilities in retaliation.

Brent crude rose 5.3 percent to $109 a barrel as of 14:09 GMT, while US West Texas Intermediate rose 2 percent to $98 following the bombing of Iran’s South Pars gas field. Tehran shares the field, which is the world’s largest, with Qatar.

In response to the South Pars strikes, Iran’s Islamic Revolutionary Guards Corp (IRGC) issued an evacuation order for Saudi Arabia’s Samref refinery and Al Jubail petrochemical facility, the UAE’s Al Hosn gas field and Qatar’s Ras Laffan refinery and Mesaieed petrochemical complex, according to reports in state-affiliated Iranian media.

These have become “legitimate and prime targets” and will be struck in the coming hours, the IRGC was quoted as saying.

Brent crude had been relatively steady this week, trading within a 7 percent range of $99-106 a barrel, far below a four-year peak of nearly $120 on March 9. It is up about $36 since the war began on February 28.

Some observers see Israel’s attacks on Iranian energy infrastructure as an attempt to goad Tehran to retaliate by striking facilities in the Gulf. This would force GCC countries to become active protagonists in an escalating war.

Iran has already enforced the near-closure of the Strait of Hormuz, through which about one-fifth of global oil supplies would usually be transported. This has led Kuwait, Iraq, Qatar, Saudi Arabia and the UAE to reduce hydrocarbon exports.

“The key question that markets are asking – not just oil markets, but bond, equities and other commodities too – is how long will this Middle East war last?” Robin Bhar, an independent commodities analyst, told AGBI before the strikes on South Pars.

“So far, markets seem fairly relaxed and are pricing in a short-duration event in which oil prices soon fall to a more reasonable level. But if the conflict persists for more than a few weeks and stretches into two to five months, for instance, then oil prices will stay higher for much longer.”