Oil price at two-year high after Qatar warns all Gulf production could stop within days

Oil Prices Hit Two-Year High as Qatar Warns Gulf Production Could Stop

Oil prices have surged to their highest level in the past two years after Qatar warned that oil and gas production across the Gulf region could halt within days if the ongoing conflict in the Middle East continues.

Qatar’s energy minister, Saad al-Kaabi, told the Financial Times that escalating tensions in the Middle East—one of the world’s most critical energy-producing regions—could have serious consequences for the global economy.

On Friday, Brent crude oil rose more than 9%, climbing above $93 per barrel, marking its highest level since the fall of 2023.

Rising Oil Prices Could Increase Global Costs

Higher oil prices rarely impact only fuel costs. They tend to spread across the economy and affect several essential sectors.

As oil prices rise, the cost of petrol and diesel increases, along with heating and household energy bills. Food production and transportation also become more expensive, and the prices of imported goods and international shipping may rise as well.

If oil and gas prices remain elevated, economists warn that inflation could rise again in major economies such as the United Kingdom and the United States, where inflation had recently begun to decline.

Al-Kaabi warned that oil prices could reach $150 per barrel if the conflict involving Iran continues in the coming weeks.

According to him, global GDP growth could be negatively affected if the war continues for several weeks. He also noted that higher energy costs could disrupt supply chains, create product shortages, and slow manufacturing activities around the world.

Consumers Are Already Feeling the Impact

Consumers are already beginning to notice rising fuel prices.

In the United Kingdom, petrol and diesel prices have started to climb. There is also a possibility that household energy bills could increase later in the year. However, immediate price changes are unlikely because the energy regulator Ofgem has already set its price cap until July.

There are growing concerns that the current situation could resemble the energy crisis triggered by Russia’s invasion of Ukraine. So far, though, oil and gas prices remain below the record highs seen in 2022.

Analysts Warn of Potential Global Economic Impact

Energy analysts say the situation could escalate depending on how long the conflict continues.

Jorge Leon, an analyst at Rystad Energy, described the current situation as a real threat to the global economy.

According to Leon, the world may be approaching a turning point. The situation could either remain a short-term energy disruption or develop into a much larger global energy crisis.

He explained that if the conflict continues for more than two weeks, the likelihood of major impacts on the global energy system and the global economic outlook will increase significantly.

Qatar Halts LNG Production After Military Attacks

Qatar is one of the world's leading producers and exporters of oil and liquefied natural gas (LNG).

This week, QatarEnergy announced that it had suspended LNG production following military attacks on its facilities.

The company declared force majeure, a legal provision that allows companies to suspend supply obligations during extraordinary circumstances beyond their control.

Al-Kaabi believes that other Gulf energy exporters may face similar disruptions if the conflict continues to escalate.

Even if hostilities ended immediately, he warned that it could take weeks or even months before production returns to normal levels.

Strait of Hormuz Disruption Threatens Global Oil Supply

The Strait of Hormuz remains a major concern for global energy markets, as it is one of the most important oil transit routes in the world.

Under normal circumstances, about 20% of the world’s oil supply passes through this narrow waterway every day.

However, shipping traffic has significantly slowed since the US-Israel conflict with Iran intensified.

If the strait were completely blocked, it could lead to higher global energy prices, rising shipping costs, and widespread supply chain disruptions.

Major economies such as China, India, and Japan rely heavily on oil shipments that pass through this route.

Alternative Pipelines May Provide Limited Relief

Some countries, including Saudi Arabia and the United Arab Emirates, have pipelines that allow them to transport oil without using the Strait of Hormuz.

However, analysts say these alternatives cannot fully replace the large volume of oil typically transported through the strait.

The longer shipping vessels face security risks in the region, the higher oil prices and shipping costs are likely to climb.

Storage Limits Could Force Production Shutdowns

According to Rystad Energy, if Gulf countries are unable to export their oil, they will eventually need to store it.

Once storage capacity reaches its limit, producers may have no choice but to shut down production entirely.

Depending on available storage levels, this situation could occur within a few days or several weeks.

Leon stated that oil prices exceeding $100 per barrel are a realistic possibility, though the most important factor will be how long prices remain at that level.

Governments May Release Strategic Oil Reserves

If oil prices rise sharply, governments around the world may intervene to stabilize markets.

One potential measure is releasing strategic oil reserves, similar to the action taken after Russia launched its full-scale invasion of Ukraine.

Such moves can temporarily increase supply and help calm volatile energy markets.

Economists Say Worst-Case Scenario Is Still Unlikely

Some analysts believe that a complete halt to Gulf energy production remains an extreme scenario.

Lindsay James, an investment strategist at Quilter, said market movements currently suggest that investors expect disruptions in the Strait of Hormuz to eventually be resolved.

However, the risk of prolonged instability increases as the conflict continues.

For households, the primary impact will likely be higher energy costs rather than widespread inflation.

For example, food inflation in the UK may remain relatively stable because much of the country’s imported food does not rely on Gulf shipping routes.

Nevertheless, persistently high energy prices could slow economic growth around the world.