LNG facility strike sends WTI above $85 as Iran tensions escalate

A US-owned LNG storage vessel was struck by a drone at Egypt's Damietta port, sending WTI crude above $85 a barrel as the US-Iran conflict widened to target maritime energy infrastructure.

A Marshall Islands-flagged LNG floating storage facility owned by a US company was hit by at least one unmanned aerial vehicle while discharging cargo at Damietta port on Egypt's Mediterranean coast, maritime security firm Ambrey reported Wednesday. No casualties or damage to port infrastructure were recorded, and no group immediately claimed responsibility. The vessel was moved outside the port, with operations at other terminals expected to resume Wednesday night.

"The attack on LNG infrastructure in the Eastern Mediterranean shows the conflict is expanding beyond the Persian Gulf," said Giovanni Staunovo, an analyst at UBS. "Every strike on energy assets tightens the supply picture and pushes prices higher."

West Texas Intermediate crude surged $5.34, or 6.7%, to $84.60 a barrel by 8:24 a.m. ET Wednesday, while Brent crude climbed 6.9% to $89.93, nearing the $90 threshold. The rally accelerated after the Energy Information Administration reported US commercial crude inventories fell by 7.2 million barrels to 404.5 million — the lowest level since 2018 and far exceeding the 1.3 million-barrel decline analysts had expected. Stockpiles at the Cushing, Oklahoma, delivery hub dropped to their lowest since 2014.

The Damietta strike is the latest in a series of attacks targeting energy infrastructure across the Middle East and Eastern Mediterranean, coming as the broader US-Iran conflict enters its fifth month. The Strait of Hormuz — which carried roughly one-fifth of global oil and LNG before the conflict — saw only six commodity-carrying vessels transit on July 27, according to Reuters, as Iran rejected an Omani proposal for joint regional control of the waterway. A senior Iranian official called the plan "unreasonable," with Tehran seeking sole control of the inbound route.

Supply Chain Pressure Intensifies

The attack on Egyptian LNG infrastructure carries particular significance for European gas markets. Egypt's Damietta and Idku LNG terminals are critical export hubs for the Eastern Mediterranean, serving as a diversification source for European buyers seeking alternatives to Russian pipeline gas. Any sustained disruption at these facilities would tighten an already strained global LNG market as northern hemisphere winter approaches.

The US and Saudi Arabia conducted joint airstrikes against Iran-backed militias in Iraq overnight, marking Riyadh's first publicly acknowledged combat role in the conflict. Iraq's Popular Mobilization Forces said at least 20 members were killed and 32 wounded. President Donald Trump told Fox News the US would "beat the f------ s--- out of them" after Iranian forces launched a ballistic missile attack on US troops in Jordan that was intercepted before reaching its targets.

Oil Markets Face Dual Supply Shock

The combination of falling US inventories, disrupted Hormuz traffic, and attacks on LNG infrastructure is creating a compounding supply shock. US crude stocks including the Strategic Petroleum Reserve fell to their lowest level since 1984, according to the EIA. Josh Young, chief investment officer at Bison Interests, said the data "raises questions of how the oil market will balance when the SPR eventually runs out, if there isn't peace and stability by then."

The last time WTI traded above $85 during a Middle Eastern conflict was in March 2022 following Russia's invasion of Ukraine, when crude briefly touched $130. The current trajectory suggests sustained elevation as long as shipping through the Strait of Hormuz remains depressed and attacks on energy infrastructure continue. Markets will watch for any verified ceasefire or safe-passage guarantees that could restore normal tanker traffic by the end of September — an outcome prediction markets currently price at just 19.5%.

This article is for informational purposes only and does not constitute investment advice.