Iran Gas Field Attack Jolts Markets, Cuts Global Oil Supply by 8.2M Barrels

Airstrike Cuts Global Oil Supply by 8.2 Million Barrels Per Day

An airstrike on Iran's South Pars gas field and associated oil facilities in Asaluyeh on March 18 has severely escalated the ongoing Middle East conflict, sending shockwaves through energy markets. The attack, confirmed by Iranian state media, is the latest event in a conflict that has already curtailed global oil supply by an estimated 7.4 to 8.2 million barrels per day (mb/d), according to analysis from Standard Chartered. The supply cuts are widespread, with production down by 2.9 mb/d in Iraq, 2.0-2.5 mb/d in Saudi Arabia, and a collective 2.0-2.3 mb/d across the UAE, Qatar, Kuwait, and Iran.

This direct hit on a major energy producer's infrastructure follows a series of escalations, including Israeli assassinations of senior Iranian officials and retaliatory missile launches from Tehran. The conflict's expansion has put global energy security at risk, disrupting critical shipping routes and prompting an historic release of 400 million barrels from the IEA's strategic petroleum reserves to counter the supply shock.

Brent Forecast Rises to $85.50 as LNG Supply Halts

Financial markets are repricing energy assets for a period of sustained high prices. Standard Chartered has revised its average Brent crude forecast for 2026 upward to $85.50 per barrel, a significant increase from its previous estimate of $70.00. The natural gas market faces an even more acute crisis. European futures held above €50/MWh, nearly 30% above their 12-month average, after drone strikes forced QatarEnergy to halt all liquefied natural gas (LNG) production. The move effectively chokes off 77 million tonnes of annual capacity, or approximately 20% of the global LNG supply, leaving major Asian importers scrambling for alternatives like coal and nuclear power.

Despite the grim supply outlook, oil prices saw a brief pullback on March 17. WTI crude fell 5.28% to settle at $93.50 per barrel, and Brent dipped 2.84% to $100.21. The temporary relief came after the U.S. Treasury Secretary confirmed that the United States was allowing Iranian oil tankers to pass through the Strait of Hormuz, a move aimed at preventing a complete collapse of global supply. However, the underlying supply disruption remains the dominant market driver.

Dollar Reigns as Gold's Safe-Haven Status Wavers at $5,000

The broad market reaction shows investors flocking to the U.S. dollar while shunning traditional safe havens like gold. The precious metal has fluctuated around the $5,000 level, failing to rally despite the intense geopolitical turmoil. Analysts suggest that rising oil prices are stoking inflation fears, weakening expectations for central bank rate cuts and making non-yielding gold less attractive. This pressure, combined with investors selling gold to generate liquidity, has capped its price.

Of course, when yields rise, gold gets hurt as well. So we've seen, I think gold really underperformed as a safe haven this time around. And really the only safe haven that's working out today is the US dollar.

— Eli Lee, Chief Investment Strategist, Bank of Singapore.

The fallout is hitting emerging market currencies hard. The Philippine peso, for example, dropped to an all-time low of P59.87 against the dollar as its central bank braces for higher inflation and a potential economic slowdown. This trend highlights the dollar's current dominance as the primary asset for capital preservation during the crisis.