Iran has issued a stern threat to attack energy infrastructure across the Gulf region, marking a significant escalation in the ongoing conflict. This threat comes in direct retaliation for reported Israeli strikes on Iran’s largest gasfield, South Pars, which represents the first targeted attack on its fossil fuel production since the war began. Iran’s Revolutionary Guards have explicitly warned of counterstrikes on several energy facilities in Saudi Arabia, the UAE, and Qatar “in the coming hours,” following state media reports that missiles had struck the South Pars gas facilities, which hold the world's largest gas reserves and are shared with Qatar.

The strikes on Iran’s South Pars gasfield were widely reported in Israeli media to have been carried out by Israel with the consent of the United States. This attack against the core of Iran’s gas infrastructure signals a key escalation in US and Israeli military operations, as the two nations had largely avoided targeting Iran’s oil and gas sector previously, a strategy that helped to contain global oil price surges.

In response, Iran’s state media has identified specific retaliatory targets, including Saudi Arabia’s Samref refinery and Jubail petrochemical complex, the UAE’s al-Hosn gasfield, and Qatar’s Mesaieed petrochemical complex and holding company, as well as the Ras Laffan refinery. A stark warning accompanied these declarations, stating, “These centres have become direct and legitimate targets and will be targeted in the coming hours. Therefore, all citizens, residents, and employees are requested to immediately leave these areas and move to a safe distance without any delay.”

The geopolitical tension immediately impacted global energy markets. Oil prices surged towards $110 a barrel on Wednesday afternoon, as the escalating threat to the Gulf’s critical oil and gas infrastructure fueled widespread concerns of further disruptions to global supplies, compounded by Iran’s continuing blockade of the Strait of Hormuz. The international oil benchmark climbed by as much as 5% to a high of $108.60 a barrel, while Europe’s gas benchmark jumped by more than 7.5% to over €55.50 a megawatt hour.

Eskandar Pasalar, the governor of Asaluyeh in southern Iran, condemned the US-Israeli escalation as “political suicide,” telling Iran’s state media that “the pendulum of war has swung” to a “full-scale economic war.” Similarly, a Qatari government spokesperson, Majid al-Ansari, warned that targeting energy infrastructure “constitutes a threat to global energy security, as well as to the peoples of the region and its environment.”

The third week of the conflict also saw previous Iranian attacks on other regional energy assets, including the UAE’s Shah natural gasfield, one of the largest globally, as well as an oilfield in Iraq, Majnoon, and the UAE’s largest port and oil storage facility, Fujairah, which were hit by Iranian drones and missiles. These prior actions have led to a significant decline in daily oil exports from the region, falling by at least 60% from prewar levels due to drone and missile strikes and Iran’s effective control over exports through the Strait of Hormuz, forcing Gulf neighbours to curtail oil and gas production as storage facilities reach capacity.

Despite these events, Iran’s own hydrocarbon infrastructure had largely remained untouched. For example, a US attack on Kharg Island, Iran’s primary oil processing hub and a cornerstone of its economy, aimed at military assets while leaving its oil export facilities intact. Iran has consistently shipped tankers of crude through the Strait of Hormuz without interruption since the war began, even while threatening to target vessels carrying crude from neighboring Gulf states. Earlier in the previous week, the global oil price had already surpassed $116 a barrel for the first time since May 2022, as traders began to factor in the escalating costs of the war on global oil and gas supplies.