Oil prices have reached their highest level in over two years, following a warning from Qatar's Energy Minister, Saad al-Kaabi, that all oil and gas production in the Gulf could stop within days.
According to a report by the Financial Times, al-Kaabi stated that the conflict in the Middle East could have severe global economic implications, potentially "bringing down the economies of the world".
Brent crude oil rose more than 9% on Friday, topping $93 a barrel, the highest level since autumn 2023, as reported by the Financial Times.
Market Impact
Rising oil prices can have far-reaching effects on the cost of fuel, heating, food, and imported goods, with potential inflationary pressures in major economies like the UK and US.
Analyst Jorge Leon, from Rystad Energy, told the BBC that the situation poses a "real risk to the global economy", with significant implications for the energy system and global macroeconomic outlook if the crisis lasts more than two weeks.
Gulf Production and Shipping
Qatar, a major oil and liquefied natural gas (LNG) producer, has stopped LNG production due to "military attacks" on its facilities, declaring "force majeure" and freeing itself from liability for failure to supply.
Al-Kaabi believes other energy exporters will follow suit in the next few days if the war continues, with about a fifth of the world's oil supply usually shipped through the Strait of Hormuz, which has seen virtually no traffic since the US-Israel war with Iran began.
Global Economic Implications
Blocking the strait could make goods and services more expensive globally, hitting major economies like China, India, and Japan, which rely heavily on crude oil imports through the waterway.
Analysts warn that the longer the strait remains threatened, the higher oil prices will rise, with storage capacity limiting the ability of Gulf countries to continue production.
Expert Analysis
Lindsay James, investment strategist at Quilter, described a prolonged halt to all oil and gas production in the Gulf as an "extreme scenario", but noted that market moves suggest investors expect the disruption to be resolved quickly.
James added that the risk grows every day that the conflict will be more prolonged than initially thought, with persistently higher energy costs weighing heavily on economic growth.
