The molten fireballs and belching smoke over the Middle East early Thursday signaled a dramatic escalation in the Iran war — and its threat to the global economy.
Israel launched a widespread strike on Iran's world-largest gas field, South Pars, triggering retaliation from Tehran against key energy sites across the Gulf Arab states.
Like the blockaded Strait of Hormuz, these facilities dictate global prices for energy and other goods, which soared early Thursday. Economists are alarmed this disruption could cause a global economic shock triggering price rises and shortages for billions of people.
With American allies in the Gulf and Europe expressing fury, President Donald Trump said Israel would launch no more attacks on the gas field unless Iran again bombed U.S. partner Qatar. If Tehran did so, he vowed he would “massively blow up the entirety of the South Pars Gas Field.”
Qatar is livid with Iran but also the United States and Israel, a senior official close to its leaders told NBC News. The Gulf kingdom is angry that a war partly framed as protecting the flows of oil and gas is now setting its vital infrastructure ablaze, the official said.
French President Emmanuel Macron called the escalation "reckless," adding that he hopes "everyone comes to their senses."
In a joint statement, Macron and leaders of the U.K., Germany, Italy, the Netherlands and Japan called for an "immediate comprehensive moratorium on attacks on civilian infrastructure, including oil and gas installations."
The six leaders also expressed their "readiness to contribute to appropriate efforts to ensure safe passage through the Strait," and welcomed the "commitment of nations who are engaging in preparatory planning."
The international benchmark of Brent crude oil spiked as high as $119 a barrel early Thursday, and wholesale natural gas prices across Europe jumped by as much as 25%. Both dipped slightly through the morning, though they remained significantly elevated compared to their prewar levels.
U.S. crude oil also briefly rose to more than $100 a barrel, but later returned to trading around $96. Since the start of the Iran war on Feb. 28, the price of U.S. crude oil has soared by 45%.
In an effort to ease oil prices, the Trump administration has relaxed sanctions on Russian oil and waived some domestic shipping restrictions. So far, neither of these has worked.
On Thursday, Treasury Secretary Scott Bessent said easing sanctions on Iranian oil currently held at sea was also under consideration.
"In essence, we will be using the Iranian barrels against the Iranians, to keep the price down for the next 10 or 14 days as we continue this campaign," Bessent said in a Fox Business Network interview. "So we have lots of levers. We’ve got plenty more that we can do."
Asked about easing Iran sanctions, Trump told reporters in the Oval Office, "We will do whatever is necessary."
Even if the Trump administration takes additional steps to boost global supply, experts say the attacks on the region's energy infrastructure will have a lasting effect.
“Even if the conflict were to end tomorrow and the Strait of Hormuz were to reopen, oil prices would not return to pre-conflict levels of $67 per barrel,” wrote veteran energy industry analyst Andy Lipow in a note Thursday.
"The damage to energy infrastructure is done and will take months if not years to repair the more extensively damaged facilities," he wrote.
Moreover, Lipow wrote, from this point on energy markets will factor a future potential closure of the strait into the price of oil.
The conflict escalates
The latest flashpoint started Wednesday when Iranian state media said Israel had bombed facilities associated with the South Pars gas field, which it shares with Qatar. Video posted to social media and geolocated by NBC News showed roiling fireballs and the sky rank with black smoke above a refinery in Asaluyeh, on Iran's Gulf coastline.
In response, Iran bombed Qatar's Ras Laffan Industrial City, a vast steel complex of refineries, storage tanks and pipelines processing liquified natural gas, or LNG. It also hit a Saudi Arabian refinery on the Red Sea and two Kuwaiti oil refineries.
QatarEnergy, the world's largest supplier of LNG, said in a statement that the attacks had caused "sizeable fires and extensive further damage," but no casualties.
The attacks knocked out 17% of Qatar's LNG export capacity, which could take up to five years to rebuild, QatarEnergy CEO Saad al-Kaabi told Reuters on Thursday.
He said the damage may require the company to invoke a clause known as "force majeure" in its long-term supply contracts for Europe and Asia. This would essentially void the contracts without penalty, but could raise broader fears in the market.
Trump said the U.S. “knew nothing” about the assault by Israel, which he wrote in a Truth Social post late Wednesday had “violently lashed out” from “anger at what has taken place in the Middle East.”
The senior official close to Qatar’s leaders disputed Trump’s assertion that the U.S. knew nothing.
Asked for comment, the White House pointed to Trump's post on Truth Social.
Countries across the Gulf condemned the escalation, and some even raised the prospect of their own direct involvement.
Saudi Foreign Minister Prince Faisal bin Farhan told NBC News in Riyadh of Tehran's retaliation that “what little trust there was has been completely shattered.”
Some analysts came away from the exchange with the assessment that Iran had gained a slight advantage from it.
"Iran emerged with the upper hand," agreed Danny Citrinowicz, a senior researcher on Iran at the Institute for National Security Studies, which is affiliated with Tel Aviv University in Israel.
"It demonstrated once again that it will not hesitate to raise the level of escalation to defend its strategic assets — without any retreat on the issue of the Strait of Hormuz," he wrote. "This was entirely predictable."
