Tensions in the Middle East have reached a fever pitch, and the world is now facing a direct threat to global energy security. The recent Israeli attack on Iran’s South Pars gas field marks a dangerous escalation—not merely a military incident, but a strike at the heart of the world’s energy supply. The resulting disruption could cause long-term shortages for countries across the globe. According to a report in The Economic Times, the International Energy Agency has described this as the worst global energy disruption in history, surpassing even the Arab oil embargo of 1973.
As Dan Pickering, chief investment officer, put it: “You can’t avoid this problem by conserving energy. The result will be so high prices that people will stop consuming.”
This was the first time Iran’s energy infrastructure in the Gulf region was directly targeted. Until March 17, the United States and Israel had refrained from such strikes. Even when U.S. President Donald Trump attacked Kharg Island—the hub of 90 percent of Iran’s oil exports—only military installations were hit. That changed when Israel attacked the South Pars field, a massive natural gas reserve that Iran shares with Qatar. In retaliation, Iran struck energy installations in Saudi Arabia, the United Arab Emirates and Qatar, targeting Saudi Aramco’s refinery as well as gas facilities in Qatar and the UAE with drones and missiles. The conflict has now taken a dangerous turn.
The South Pars gas field is the backbone of global liquefied natural gas (LNG) supplies, including for India. The immediate spike in oil and gas prices after the Israeli attack underscored its importance. Even before this escalation, the world was grappling with disruptions to crude oil supplies because of Iran’s blockade of shipping through the Strait of Hormuz. Now, damage to production facilities threatens lasting effects for years.
Qatar’s Ras Laffan industrial city—the world’s largest LNG export hub—has been devastated by Iranian missile attacks. According to Qatar Energy officials, the damage has reduced the country’s total LNG export capacity by about 17 percent, and repairs could take three to five years. The attack is estimated to cost Qatar roughly $20 billion in revenue annually.
The repercussions extend far beyond Qatar. India, for instance, imports 40 to 50 percent of its natural gas needs from Qatar, making this a serious challenge to its energy security. More broadly, the Middle East accounts for approximately 75 percent of oil and 59 percent of natural gas exports to China, India, Japan and South Korea. All these economies are now facing oil and gas shortages.
Sectors such as hospitality, tourism and manufacturing are already being affected. The National Restaurant Association of India has stated that 75 percent of the food service industry depends on liquefied petroleum gas, and a prolonged shortage could cost the economy ₹12,000–13,000 crore per day. Meanwhile, Brent crude oil prices have surged by more than 39 percent, surpassing $110 per barrel. Rising fuel and natural gas prices have increased freight and production costs worldwide, fueling inflation. In India, premium petrol has become costlier by ₹2 and industrial diesel by ₹22 per liter.
The crisis also threatens global food security. Qatar contributes roughly 10 percent of the world’s urea supply, but with many of its plants closed due to the attacks, fertilizer shortages loom in India and beyond.
If this conflict continues, it could push the global economy into recession. Rising energy and food prices are stoking inflation. The International Monetary Fund and the World Bank have already lowered global growth forecasts. Capital flows to developing countries have declined, and many nations have increased defense budgets, putting pressure on social and development spending.
Global stock markets, including India’s, have seen sharp declines. The Indian stock market has lost between ₹27 lakh crore and ₹34 lakh crore in assets over the past three weeks. Foreign investors are withdrawing capital. According to Moody’s, if energy prices continue to rise, pressure on the Indian rupee will increase further.
The human and economic toll extends to the nine million Indians working in Gulf countries. So far, 50,000 have returned home. If the war continues, more will follow, disrupting livelihoods and remittances that are vital to India’s economy. Goldman Sachs estimates that if the conflict persists, the GDP of Qatar and Kuwait could decline by up to 14 percent.
War breeds uncertainty, which stifles private investment and weakens financial systems. It leads to rising national debt, high inflation, destroyed infrastructure and diminished long-term growth. A study of more than 100 wars since World War II found that such conflicts had serious and lasting negative impacts on the economies of the countries involved.
The current hostilities have plunged the global economy into a multifaceted crisis. If this conflict does not end soon, it could become one of the largest economic crises since the 1990s. For consumers, businesses and policymakers worldwide, the risk of a global recession is no longer a distant warning—it is knocking at the door.
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*Bargi Dam Displaced and Affected Association
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