Israel struck Iran’s South Pars gas facility, worsening Iran’s energy crisis

A new wave of conflict in the Middle East spilled into Iran’s energy sector over the weekend, as Israel launched an attack on a major gas facility connected to Iran’s largest natural gas field.

On Saturday, an Israeli strike hit the Phase 14 processing plant of the South Pars gas field, causing a major explosion and fire, according to the semi-official Tasnim news agency. 

The blast forced the shutdown of a nearby production platform. South Pars, located in the Persian Gulf, is the world’s largest gas field and is shared between Iran and Qatar. Iran uses most of its gas domestically.

The strike marked a serious shift in the conflict, which began Friday when Israel carried out a series of attacks on Iran’s nuclear program. By targeting energy infrastructure, Israel has now opened a new front in the crisis. 

The strikes will further cripple Iran’s economy and shake the markets

The recent attacks come at a time when Iran is already struggling with severe power outages. Iran has already seen widespread blackouts in recent months, hitting businesses and households. 

The Iran Chamber of Commerce estimates the economic cost of these outages at around $250 million a day.

Though the damage may mainly impact Iran’s internal energy supply, global markets are bracing for more volatility when trading resumes after the weekend.

Oil markets had already reacted strongly before this latest attack. U.S. crude prices jumped by as much as 14% on Friday, finishing near $73 per barrel. Experts warn that further attacks could deepen the threat to oil production and shipments in the region.

“This is pretty significant,” said Richard Bronze, head of geopolitics at Energy Aspects Ltd. He added, “We appear to be in an escalatory cycle,” and warned that Israeli forces may continue to strike Iranian energy sites.

In a separate incident, a fire also broke out at the Fajr Jam gas plant, another key processing facility in Iran. This plant handles gas from South Pars as well as the Nar and Kangan fields. Tasnim described it as one of the largest facilities of its kind in the country.

Goldman Sachs analysts have already raised their short-term oil price forecasts by $2 to $3 a barrel in response to the rising tensions. 

They noted the potential for oil prices to spike above $100 per barrel if the situation worsens, though their base forecast still expects prices to fall below $60 by the end of the year.

“The potential of further escalation in the Middle East implies that the short-term risks to our price forecast are now skewed to the upside,” Goldman analysts, including Daan Struyven, wrote in a recent note.

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