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Middle East

Energy Infrastructure in Crosshairs as US-Israel Iran War Enters Fourth Week

What Happened

Notable events in the US-Israel Iran war over the past week:

  • The UAE’s Shah gas field was hit by an Iranian strike on March 16, resulting in a shutdown. Shah provides around 20% of the UAE’s gas supply and 5% of global granulated sulfur (a fertilizer input).
  • Iran’s South Pars gas field was hit by an Israeli strike on March 18. South Pars is the largest gas field in the world and a key source of domestic energy for Iran.
  • Qatar’s Ras Laffan gas hub was hit by an Iranian strike on March 18, resulting in ‘extensive damage.’ Ras Laffan is a sprawling industrial city that itself provides around one-fifth of global LNG.
  • Refineries in Kuwait and Saudi Arabia were damaged by Iranian attacks on March 19.
  • A US F-35A was forced to perform an emergency landing during combat missions in Iran, as first reported on March 19. According to unverified claims by the IRGC, the plane was hit by Iranian anti-aircraft fire.
  • President Trump called NATO allies cowards and the Alliance a ‘paper tiger’ without the US on March 20.
  • Thousands of additional troops are in the process of being deployed to unspecified bases in the Middle East, as reported by Reuters on March 20.
  • President Trump said he was considering ‘winding down’ military operations in the Middle East on March 21.
  • A joint US-Israeli strike was launched on the Natanz nuclear enrichment facility on March 21. The Israeli towns of Dimona and Arad were struck by Iranian missiles in an apparent reprisal later in the day. Both are near where Israel’s stockpile of nuclear weapons is believed to be stored.
  • On March 22, President Trump threatened to ‘obliterate’ Iran’s electricity infrastructure unless the Strait of Hormuz is opened within 48 hours. Iran subsequently warned that it would retaliate and ‘irreversibly destroy’ Gulf energy and water infrastructure should its own grid is targeted.
  • President Trump pushed back the ultimatum deadline by five days on March 23, claiming that the US and Iran had held productive talks over the weekend.

Why It Matters

  • Damage to energy infrastructure will resonate in global supply chains for years to come. Iranian strikes against Ras Laffan have knocked out about 17% of Qatar’s LNG capacity and it will take 3-5 years to repair the damage, according to the CEO of QatarEnergy. Here and elsewhere in the Gulf, whether physical damage to energy infrastructure or an eroded perception of safety, the impacts will be lasting. A significant degree of economic cost is already baked in, even if the war comes to a sudden end.
  • Supply chain disruptions through the Strait of Hormuz go beyond energy. The risk to fertilizer and food production was highlighted last week, but other supply chains like aluminum, sulfur, helium, petrochemicals, and consumer goods are also being held up and/or diverted so long as the Strait of Hormuz is blocked. These disruptions will manifest as inflationary pressure; for example, the link between elevated aluminum prices and inflation is well-established. Moreover, an analysis from the West Point Modern War Institute argued this week that these shortages will hamper the kind of re-industrialization and scaling up of US defense industry that has long been promoted by President Trump. This effort will now be even more critical in light of exhausted ordinance from the Iran war.