Israeli Strike on South Pars Gas Field Drives Oil Past $119

On March 18, 2026, Israeli warplanes struck the crown jewel of Iran's energy infrastructure: the South Pars gas field, the largest natural gas reserve on Earth. Within hours, Brent crude surged past $110 a barrel. By the following day, as Iran launched retaliatory strikes against energy facilities across four Gulf states, the benchmark breached $119 — a level not seen since the darkest days of the 2022 Ukraine crisis [1][2]. What began as a targeted military strike has metastasized into the most severe disruption to global energy markets in half a century.

What Is South Pars and Why Does It Matter?

The South Pars/North Dome field straddles the maritime border between Iran and Qatar in the Persian Gulf, holding an estimated 1,800 trillion cubic feet of natural gas and roughly 50 billion barrels of condensates [3]. On Iran's side, the field provides approximately 75 to 80 percent of the country's total natural gas production, with daily output reaching a record 730 million cubic meters in 2025 [4][5].

Critically, most of what Iran extracts from South Pars is consumed domestically — powering homes, fueling industry, and feeding a vast petrochemical sector. Iran pipes relatively little gas to export markets compared to Qatar's share of the same geological formation, but it does supply Turkey and Iraq via pipeline, and its condensate exports reach China and other Asian buyers [6]. The strike's most immediate victims, analysts say, will be ordinary Iranian civilians who depend on South Pars gas for heating, cooking, and electricity.

Qatar's portion of the same reservoir — developed as the North Dome field and processed at the massive Ras Laffan complex — accounts for roughly 20 percent of global liquefied natural gas supply [7]. The proximity of these two halves of the world's largest gas field to an active war zone has made energy traders deeply anxious.

The Attack: What Was Hit and How Badly

Israeli strikes targeted multiple phases of the South Pars processing complex at Asaluyeh, on Iran's southern Bushehr coast. Iranian state media and the IRGC-affiliated Tasnim News Agency confirmed that phases three, four, five, and six of the Asaluyeh refinery sustained direct hits, with missile strikes targeting storage tanks and gas processing compounds [8][9]. The strikes halted output at two refineries with a combined capacity of approximately 100 million cubic meters per day [10].

Workers were evacuated to safe zones while emergency and firefighting crews battled resulting blazes across the facility. Iran's authorities have not released comprehensive casualty figures for the South Pars complex itself, though the broader air campaign across Iran has inflicted significant civilian casualties since the war began on February 28 [11]. The full extent of structural damage remains unclear, with Iranian officials restricting media access to the site.

U.S. Defense Secretary Pete Hegseth characterized the South Pars strike as "a warning" to Iran, while President Trump — who said Israel acted alone in the operation — subsequently threatened to "massively blow up the entire South Pars gas field" if Iran continued attacking Gulf energy infrastructure [12][13].

The repair timeline is a critical unknown. The Soufan Center's analysis drew an important distinction: unlike oil storage tanks that can be patched relatively quickly, as Saudi Arabia demonstrated after the 2019 Aramco drone attacks at Abqaiq, LNG production facilities and gas processing infrastructure "cannot be as easily (or as inexpensively) repaired, especially against a backdrop of war" [5]. Industry analysts estimate months of disruption at minimum, potentially extending well beyond a year for full restoration of processing capacity if hostilities continue.

Source: FRED / U.S. Energy Information Administration

Data as of Mar 19, 2026CSV

Oil Prices in Historical Context

Brent crude's surge past $119 places the current crisis among the most severe oil price shocks in modern history, though it remains below the all-time nominal peak of $147 per barrel reached in July 2008 [14]. That spike was driven by surging demand from China and other emerging economies colliding with stagnant production; it collapsed to $32 per barrel by December 2008 as the global financial crisis destroyed demand.

The 2022 Ukraine war comparison is more instructive. When Russia invaded Ukraine on February 24, 2022, Brent surged to approximately $139 per barrel within two weeks before gradually receding as markets priced in the reality that Russian oil continued flowing through alternative channels [15]. The price correction took roughly four months, with Brent settling back below $100 by late June 2022 as recession fears grew.

The current crisis differs in a fundamental way: the supply disruption is physical and immediate, not merely financial or sanctions-driven. With the Strait of Hormuz effectively closed to Western-allied shipping, the volume of oil actually removed from the market dwarfs previous shocks.

The Strait of Hormuz: A Chokepoint Under Siege

The escalation's most consequential dimension may be the near-total shutdown of the Strait of Hormuz. Following the initial U.S.-Israeli strikes on February 28, the IRGC issued warnings prohibiting vessel passage, and Iran launched at least 21 confirmed attacks on merchant ships by March 12 [16]. Tanker traffic initially dropped by approximately 70 percent, with over 150 vessels anchoring outside the strait, before falling to near zero [17].

Roughly 20 percent of the world's daily oil supply and a significant share of global LNG typically transits the narrow waterway. On March 5, Iran announced it would keep the strait closed only to ships from the U.S., Israel, and Western allies, but enforcement has been inconsistent and commercial insurers have largely refused to cover transits [16].

The disruption has created what analysts describe as the largest supply shortfall in the history of global oil markets. Citi has forecast a supply disruption of 11 to 16 million barrels per day through April, while other estimates peg the actual shortfall at 5 to 8 million barrels per day on crude alone, with an additional 3 to 5 million barrels per day on refined products [18][19].

OPEC's Thin Buffer

OPEC+ agreed in early March to raise production by 206,000 barrels per day in response to the crisis — a figure analysts immediately dismissed as woefully inadequate [20][21]. The core problem is that OPEC's spare capacity is concentrated almost entirely in Saudi Arabia and, to a lesser extent, the UAE. Most other OPEC+ members are already producing at or near maximum capacity.

Even Saudi spare capacity — estimated at roughly 2 to 3 million barrels per day — faces a critical constraint: much of it cannot reach global markets if the Strait of Hormuz remains inaccessible [19]. Alternative export routes via the Red Sea and pipelines to the Mediterranean exist but have limited throughput. The result is a market in which the theoretical spare capacity cannot offset the actual supply loss.

Source: EIA / FRED / News Reports

Data as of Mar 19, 2026CSV

Iran's Retaliatory Spiral

Iran's response to the South Pars strike was swift and sweeping. On March 19, Tehran attacked energy infrastructure across four Gulf states: the world's largest LNG complex at Ras Laffan in Qatar, a gas field and facility in the UAE, a Saudi Arabian oil refinery, and two Kuwaiti gas units [1][22].

Qatar declared force majeure on its enormous volume of gas exports after Iranian drone attacks, with sources telling Reuters it may take at least a month to return to normal production levels [7]. Given that Qatar supplies 20 percent of global LNG, this single retaliatory act sent shockwaves through Asian and European energy markets.

Iran's retaliatory calculus follows a pattern familiar to regional security analysts: asymmetric escalation targeting economic vulnerabilities. A spokesperson for Khatam al-Anbiya, the IRGC's construction and military engineering headquarters, declared that Iran considers "targeting the fuel, energy and gas infrastructure of the country of origin legitimate" and vowed to "retaliate strongly at the first opportunity" [23].

The historical pattern of Iranian responses to strikes on its energy infrastructure suggests a multi-phase approach: immediate missile and drone salvos against accessible targets, followed by sustained asymmetric pressure through maritime disruption, proxy operations, and cyber attacks. The Strait of Hormuz mining and vessel interdiction campaign represents this doctrine in action.

The Dual-Use Debate: Military Target or Civilian Infrastructure?

The legality and strategic rationale for striking South Pars has become one of the most contested aspects of the escalation. Israel and the United States have framed Iran's energy infrastructure as dual-use, arguing that revenue from oil and gas exports funds the IRGC, its proxy network across the region, and Iran's missile and nuclear programs [24].

The Soufan Center's analysis suggests a more calculated motivation: Israel aimed to "inflict additional pressure on the regime by making the living conditions for civilians intolerable" and to "shape the conditions ripe for successful anti-regime mobilization by Iranians" [5]. This framing — deliberately targeting civilian energy supply to foment domestic unrest — raises serious questions under international humanitarian law, which prohibits attacks on objects indispensable to the survival of the civilian population.

Qatar's Foreign Ministry explicitly condemned the strike, stating that "targeting energy infrastructure constitutes a threat to global energy security" [23]. International legal experts remain divided. Under the law of armed conflict, dual-use objects can be legitimate targets if the military advantage gained is proportionate to expected civilian harm. But critics argue that South Pars — which primarily supplies domestic civilian consumption rather than military operations — fails that test.

The EU's formal designation of the IRGC as a terrorist organization in January 2026 has complicated the legal landscape further, providing rhetorical ammunition for those who argue that any economic asset benefiting the Iranian state indirectly supports designated terrorist activity [25]. But this broad interpretation, if accepted, would effectively render all civilian infrastructure in Iran a legitimate target — a precedent most international law scholars reject.

Global Economic Shockwaves

The energy price surge is already rippling through the global economy. European natural gas prices nearly doubled after Iranian drone attacks on Qatari facilities in early March, and LNG spot prices in Asia have spiked to crisis levels [26][27].

For European consumers, the crisis arrives as a cruel echo of the 2022 energy shock triggered by the Ukraine war. The Atlantic Council warned that a prolonged disruption could trigger a full-blown European energy crisis, with households facing sharply higher heating and electricity bills [28]. Energy-intensive manufacturing sectors — chemicals, fertilizers, steel, glass, and paper — face the most acute pressure, with countries including Germany, Italy, and the Netherlands potentially seeing production cuts or plant closures [29].

In the United Kingdom, more than 100,000 jobs are estimated to be at risk from the market turmoil [29]. California gasoline prices surged above $5 per gallon during the second week of March [30]. The World Economic Forum has warned that the crisis threatens to derail the fragile global economic recovery, with higher energy costs feeding directly into production costs for steel, chemicals, and electronics, squeezing margins and weakening export competitiveness [31].

In Asia, the disruption has been equally severe. The Council on Foreign Relations reported that the war is "causing energy chaos in Asia," where countries like Japan, South Korea, and India are heavily dependent on Gulf LNG and crude imports [27]. With Qatar's force majeure declaration and the Hormuz shipping collapse, Asian buyers are competing fiercely with European importers for the diminishing pool of available spot LNG cargoes.

Speculative Premium vs. Real Supply Loss

A key question for markets is how much of the $119 Brent price reflects actual supply fundamentals versus a speculative risk premium driven by fear of further escalation.

The answer appears to be: both, in roughly equal measure. The physical supply disruption is genuine and historically unprecedented. With Hormuz traffic near zero and Iranian, Qatari, and other Gulf exports severely curtailed, the market faces a real-world deficit of millions of barrels per day that OPEC spare capacity cannot bridge [19].

But the futures curve also reflects market expectations of further escalation. Trump's threat to destroy the entire South Pars field, Iran's vow of "zero restraint," and the expanding geographic scope of attacks all suggest the conflict could widen further [13]. Oil futures in backwardation — with near-term contracts trading at a steep premium to deferred months — indicate that traders see the current supply crunch as severe but potentially temporary, with markets pricing in some probability of de-escalation over a three-to-six-month horizon.

Historical precedent suggests that geopolitical risk premiums of $20 to $40 per barrel are common during acute crises, but they tend to erode within weeks to months once the immediate threat of supply destruction passes [14][15]. The critical variable is whether the Strait of Hormuz reopens to commercial traffic — an outcome that depends entirely on the military and diplomatic trajectory of a conflict that, as of March 19, shows no signs of abating.

What Comes Next

The South Pars strike has crossed what the Soufan Center calls a "red line" — the targeting of upstream energy assets that are foundational to both Iran's domestic economy and the global energy system [5]. Iran's retaliatory attacks on Gulf infrastructure have crossed another, expanding the conflict's blast radius to countries that had sought to remain neutral.

The immediate outlook is grim. With Hormuz effectively closed, OPEC unable to compensate, and both sides escalating attacks on energy infrastructure, oil prices could test the 2008 all-time high of $147 if the conflict persists through April [18]. Strategic petroleum reserve releases may calm headlines but cannot meaningfully address a supply disruption of this magnitude [32].

The longer-term consequences may prove even more significant. The crisis has exposed the fragility of a global energy system that routes a fifth of its oil and a substantial share of its gas through a single chokepoint in an unstable region. Whether it ends in weeks or months, the South Pars strike and its aftermath will reshape energy security calculations — and defense budgets — for a generation.