Oil prices jump following first attacks on Iranian production facilities

By Hanna Ziady, David Goldman, CNN

London/New York (CNN) — Oil and natural gas prices spiked Wednesday following reports of the first attacks on Iranian production facilities in the war, including the world’s biggest natural gas field. The incidents mark a major escalation in the conflict, which has so far largely spared Iran’s energy infrastructure.

Brent crude, the global oil benchmark, jumped 5% to near $109 a barrel. WTI, the US benchmark, rose 2.5% to $98 a barrel. Benchmark European natural gas prices, for deliveries in April, surged more than 7% at one point.

Iran’s semi-official Fars and Tasnim news agencies reported Wednesday that some key facilities belonging to the country’s oil and natural gas industry, including refineries, were hit by US-Israeli strikes, with emergency services working to contain fires.

Tasnim named South Pars, the world’s biggest natural gas field, and Asaluyeh, which has oil and petrochemical facilities. South Pars is shared with Qatar, which has already shut down the world’s biggest liquefied natural gas plant.

Earlier in the war, Israel attacked a fuel depot in Tehran and on Friday the United States targeted military infrastructure on Iran’s Kharg island, but Wednesday’s strikes mark the first attacks on production facilities.

The latest attacks will add to fears of a longer-lasting war. “Energy markets are having to continuously price in a more prolonged disruption to oil and gas flows through the Strait of Hormuz, with little sign of de-escalation or a resumption in oil and LNG flows through the key chokepoint,” Warren Patterson, head of commodities strategy at ING, wrote in a note this week.

Brent crude settled at $103.42 Tuesday, its highest level since the start of the war, as Iran intensified its attacks on energy infrastructure in the Gulf. Crude prices are up around 40% since the United States and Israel attacked Iran on February 28.

Iraq to send oil via Turkey

Oil price moves indicated that traders drew scant comfort from news that Iraq had clinched a deal to resume a small amount of crude oil exports via Turkey, bypassing the blockaded Strait of Hormuz.

Crude exports from Iraq’s Kirkuk oil fields are set to resume Wednesday from Turkey’s Ceyhan port after the Kurdistan Regional Government, which controls part of northern Iraq, agreed to allow oil to flow via the Kurdistan Region-Ceyhan pipeline.

Iraq’s federal government and the KRG “also agreed to take the necessary security measures to protect the oil fields and ensure the continuity of oil exports,” the KRG said in a statement Tuesday.

The pipeline exports from Kirkuk will flow at a rate of 250,000 barrels a day, a mere “drop in the ocean,” according to Neil Wilson, strategist at trading platform Saxo. But the resumption of those flows is still “another positive headline relative to the simmering war,” he said in a note.

For context, Iraq was producing about 4.5 million barrels of oil a day before the war started, according to the US Energy Information Administration. The near-shutdown of the Strait of Hormuz means that around 20 million barrels of crude and oil products, about a fifth of world oil supply, are choked off from the global market every day.

Separately, an Iranian security source told CNN that Tehran is in discussions with eight countries outside the Middle East to grant safe passage through the Strait of Hormuz to tankers carrying oil traded in Chinese yuan. Oil is largely traded in dollars but one exception is Russian oil, which is traded in rubles or yuan.

US gas prices jump

Gasoline prices in the United States hit their highest level in almost two and a half years, delivering another setback to Americans struggling to get by.

The price of a gallon of regular gas rose another 5 cents, on average, to $3.84, the highest price since September 25, 2023, according to the American Automobile Association.

Gas is now averaging $4 or more in seven states, and it has topped $5 a gallon in California, Hawaii and Washington, AAA said.

The nationwide average price has risen by 86 cents in just 18 days – a 29% jump – in one of the fastest spikes for gas prices on record. The rapid increase is on par, on a percentage basis, with the gas price shock during Hurricane Katrina, when the storm barreled into the Gulf Coast in the summer of 2005, knocking out much of America’s oil refining operations.

For oil traders, the focus remains on the duration of the war. Also on Wednesday, Iran launched fresh strikes on Israel, vowing revenge for the killing of two top Iranian leaders this week, including security chief Ali Larijani. Two people were killed by missile shrapnel in Tel Aviv, according to police, and multiple locations in the city were struck by falling debris.

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CNN’s Frederik Pleitgen, Mohammed Tawfeeq, Jessie Yeung and Nadeen Ebrahim contributed reporting.