Iran's attacks on energy facilities in the Gulf unsettle markets and spark concerns about a possible recession

Escalating Conflict and Its Global Impact

In the lead-up to the recent conflict that began a week ago, Iran repeatedly cautioned that any aggression against it would provoke a forceful response, potentially destabilizing the entire region and beyond.

Now, just one week into the war, Iran’s retaliatory actions have sent shockwaves through international energy markets, causing widespread volatility.

Since hostilities erupted last Saturday, Iran has intensified its aerial assaults throughout the Gulf and, by Thursday, had extended its attacks to Azerbaijan.

Although Tehran insists its operations are aimed solely at American and Israeli interests, evidence on the ground shows that vital energy infrastructure across the Gulf—critical to the world’s largest economies—has also come under fire from Iranian missiles and drones.

Furthermore, Iran has disrupted shipping through the Strait of Hormuz—a vital passage for about 20% of the world’s oil—leaving over 200 vessels stranded, according to Lloyd’s List.

Following drone strikes on its facilities in Mesaieed and Ras Laffan Industrial City, Qatar was forced to halt production at its leading liquefied natural gas plant, sending ripples through global energy markets and causing prices to surge.

Qatar’s LNG output represents roughly a fifth of the world’s supply and is essential for meeting energy demands in both Asia and Europe.

Subsequent Iranian attacks led to the closure of the world’s largest oil refinery in Saudi Arabia, while oil production in Iraq and gas fields in Israel were also affected. Major ports in Dubai, among the busiest globally, have reportedly experienced disruptions as well.

The UK Foreign Office noted on Friday that, although the frequency of Iranian missile and drone strikes has decreased since the war’s onset, the range of targets has broadened, with a growing emphasis on economic and energy-related sites.

Qatar’s Energy Minister, Saad al-Kaabi, warned in a Financial Times interview that the ongoing conflict could have catastrophic effects on the global economy.

He stated, “If the war drags on for several weeks, worldwide GDP growth will suffer. Energy costs will climb for everyone, certain goods will become scarce, and supply chain disruptions could force factories to halt production.”

The Strait of Hormuz: A Critical Chokepoint

Dr. Yousef Alshammari, head of the London College of Energy Economics, told Euronews that a prolonged blockade of the Strait of Hormuz could trigger a worldwide recession.

“As we approach the summer months, the risk of a global economic downturn becomes even greater,” Alshammari observed.

FILE: IRGC speedboats during exercises in the Persian Gulf, August 2023 - AP Photo

He added, “Political pressure is likely to mount, especially from China, which is a major importer of Iranian oil.”

“I doubt China will remain passive, and the ideal outcome would be the reopening of the Strait of Hormuz.”

Alshammari pointed out that natural gas prices, particularly in Europe, have already surged by over 50%, though oil prices have not risen as sharply as many anticipated.

“This is mainly because we are currently in a period of low demand, and global oil supplies remain robust,” he explained.

Unpredictable Strategies and Unclear Motives

Matthew Bryza, former US ambassador to Azerbaijan, told Euronews that Iran’s recent attacks on Azerbaijan, Turkey, and Cyprus lack a clear or logical military strategy.

“It’s puzzling why Iran would target Azerbaijan’s Nakhchivan region, especially since Tehran likely wants to avoid drawing Azerbaijan into the conflict,” Bryza remarked.

He noted that Iran’s actions are even more perplexing given that Azerbaijan’s President Ilham Aliyev was the only world leader to visit the Iranian embassy and offer condolences after the war began, following attacks that killed Iran’s supreme leader and other top officials.

“Additionally, when Iran requested Azerbaijan’s assistance in evacuating Iranians from Beirut, President Aliyev responded by sending a plane free of charge. Yet, just hours later, Iran launched an attack on Azerbaijan. It simply doesn’t add up,” Bryza said.

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Bryza speculated that Tehran might be seeking to destabilize societies and economies in order to pressure US President Donald Trump, as ongoing supply chain issues and rising oil prices could harm Republicans in the upcoming midterm elections and potentially prompt Trump to relax his stance on Iran.

However, Bryza believes the more likely scenario is that lower-ranking commanders are making independent decisions after Khamenei’s recent directive to delegate military authority in the event of senior officials’ deaths.

“For whatever reason, these commanders believe their actions are justified, even if they appear irrational in the broader context,” Bryza concluded.