Market Update: The oil and gas shock: traders contemplate an energy crisis – Full Analysis

For the past week, oil and gas traders have watched as a long-feared “worst-case scenario” played out in energy markets, said Bloomberg. Tanker traffic through the Strait of Hormuz, through which a fifth of the world’s oil and gas production flows, “has all but ground to a halt”, while Iranian missile and drone attacks have forced the closure of the world’s biggest liquefied natural gas (LNG) facility in Qatar, along with Saudi Arabia’s largest oil refinery.

It used to be thought that all bets would be off for the global economy in such a scenario. And yet, while prices have surged higher, the scale of the moves has been far smaller than in previous crises. “We’re still a long way from ‘oil shock’ territory,” said Nils Pratley in The Guardian. The jump in prices to around $80/barrel is nowhere near the highs of $125 seen shortly after Russia’s invasion of Ukraine in 2022. “A gas shock, however, looks a real and present threat.” European wholesale prices hit the stratosphere – jumping by 50% on two consecutive days, before falling back – as QatarEnergy halted production, taking “20% of the world’s LNG offline at a stroke”.