The conflict in Iran shows no signs of abating. With a near-term resolution appearing unlikely, the situation threatens to evolve into a protracted struggle that could destabilize the Middle East and place significant strain on the global economy.
As the hostilities conclude their first week, regional powers are assessing the damage and contemplating the future. The Middle East has long established its reputation as the primary supplier for the global oil and gas trade. However, with tankers unable to traverse hazardous waters and missiles frequently targeting vital energy infrastructure, the impact on fuel markets is already severe. Leaders warn that the longer the conflict persists, the more detrimental the consequences will be for the world economy.
“This will bring down the economies of the world,” Saad al-Kaabi, Qatar’s energy minister and CEO of its state-owned energy firm, stated on Friday. “If this war continues for a few weeks, global GDP growth will be impacted. Energy prices for everyone are going to rise.”
Like other major oil and gas exporters in the Persian Gulf, Qatar has been forced to suspend nearly all shipments over the past week. Tanker traffic through the Strait of Hormuz—the vital artery connecting the Gulf to global markets—has ground to a halt as operators fear for their safety and insurance providers reassess their coverage.
Normally, one-fifth of the world’s traded petroleum and liquefied natural gas (LNG) moves through this strait. Qatari exports are a critical component of this supply, particularly LNG, with the nation accounting for a significant portion of the global market.
Earlier this week, the Ras Laffan LNG export facility—the largest of its kind globally—was struck by an Iranian drone, forcing the plant to cease operations for the first time in its thirty-year history. While the ultimate global impact depends on the duration of the closure, the facility’s shutdown triggered a 50% spike in European gas prices on Monday.
“We do not yet know the extent of the damage, as it is currently being assessed. It is not clear how long repairs will take,” al-Kaabi told the FT.
For Qatar, the war has challenged its hard-earned status as a stable and reliable LNG producer in a region often prone to market volatility. “We are a reliable supplier for our buyers,” al-Kaabi noted in 2020. In its pursuit of becoming a premier global energy producer, Qatar even withdrew from OPEC in 2018. At the time, al-Kaabi stated the move was intended to “strengthen Qatar’s position as a reliable and trustworthy energy supplier across the globe.”
Ripple effects beyond the pump
While Europe and Asia are the primary buyers of Qatari gas, al-Kaabi warned that the repercussions would be felt globally as energy inflation impacts other industrial sectors. His comments align with warnings from economists, such as Allianz’s Mohamed El-Erian, who suggest that a prolonged conflict could result in persistent global inflation and stagnant economic growth.
“Beyond energy, there will be a halt to all other trade between the [Gulf] and the rest of the world, which will have a significant effect on the economies of the [Gulf] and all trading partners globally,” al-Kaabi said. “There will be product shortages and a chain reaction affecting factories that cannot maintain supply.”
The consequences of a sustained energy disruption extend far beyond fuel prices. Rising natural gas costs directly increase electricity generation expenses, meaning households and businesses in Europe and Asia could face higher utility bills within weeks. Energy-intensive sectors—such as steel, aluminum, fertilizers, and chemicals—would be among the first to suffer as production costs climb alongside fuel prices. Some manufacturers may be forced to reduce output or shut down plants entirely, exacerbating the supply-chain issues already affecting global markets.
For Europe, the timing is particularly difficult. The continent spent years reducing its reliance on Russian gas following the 2022 invasion of Ukraine, making Qatari LNG a cornerstone of its energy security. A long-term outage at Ras Laffan would force European buyers to compete aggressively on global spot markets for supplies from the U.S., Australia, and other regions, further driving up prices.
Asia faces its own set of vulnerabilities. As major importers of Qatari LNG, Japan, South Korea, and China would face difficult choices in the event of a sustained shortfall: depleting strategic reserves, negotiating emergency supplies at premium rates, or implementing industrial demand-reduction measures. Japan and South Korea, which possess limited domestic energy production, are particularly exposed, as energy security has been a persistent national concern since the oil shocks of the 1970s.