Qatar’s energy minister Saad al-Kaabi says price of barrel of oil could double to more than $150 driving up energy prices
The conflict in the Middle East could see the price of a barrel of oil double dragging down global economies, Qatar’s energy minister has warned.
Oil is currently trading at around $89 a barrel, after spending most of the year around the $60-$65 mark. But Saad al-Kaabi says this could soar to more than $150 adding such a rise will “bring down the economies of the world”. He added: “If this war continues for a few weeks, GDP growth around the world will be impacted. Everybody’s energy price is going to go higher. There will be shortages of some products and there will be a chain reaction of factories that cannot supply.”
Mr Kaabi warned Gulf energy exporters could shut down production, and that in turn would drive the price of oil up. He told the Financial Times that even if the war in Iran and surrounding region does end soon, it is likely to take weeks or months for production cycles to return to normal.
It comes after an Iranian drone strike hit its largest liquefied natural gas plant earlier in the week. Oil is on track for its biggest weekly gain since 2022 as prices have soared nearly 20 per cent..
The conflict has sent energy markets into a tailspin, as Iran effectively shut the key shipping route the Strait of Hormuz. Economists have warned a prolonged spike in oil and gas prices could add to inflation and push central banks to tighten policy.
Petrol prices in Britain have been nudging higher and energy firms have pulled many fixed tariffs for households – with warnings the Ofgem set price cap will rise sharply in July, if the conflict continues.
Qatar is the second largest producer of LNG. Not a huge amount of Qatar gas is exported to Europe, but Mr Kaabi warns that Asian markets will look to buy whatever gas is available driving up prices.
Mr Kaabi said he expects more Gulf countries to call force majeure in the coming days – allows for a suspension or reduction in production due to unpredictable and unavoidable events.
Joshua Mahony, chief market analyst at Scope Markets, said: “Oil prices have continued to rise, as we head towards the biggest weekly gain in four years as hopes of a swift resolution in Iran fade.
“For markets, they are waking up to the possibility of a sharp increase in energy costs and inflation if this conflict runs on for weeks, with the differing levels of storage available within each country signalling that one-by-one we could see production facilities shut down without the ability to export or store their oil.”
The price of oil is at its highest level in about eight months, since the US dropped ‘bunker-buster’ bombs on Iranian nuclear facilities in June.
The Middle East is the biggest and most vital oil-producing region across the globe. The Strait of Hormuz on Iran’s southern border – the target for strikes – is also a fundamental transport network for shipping oil to various markets.
This crucial trading route sees around 21 million barrels per day – which is approximately a fifth of the world’s oil trade – pass through its waters.
The 100-mile stretch links the Persian Gulf to the Gulf of Oman and to the Arabian Sea and the Indian Ocean, with any threat of the waterway becoming blocked, likely to spark a rise in oil pricing.
The RAC says if oil prices hit $90 a barrel, the average price at the forecourt will rise beyond 140p a litre for unleaded. At $100, it would go to 150p.
Mr al-Kaabi also warns gas prices could hit four times the level they were before the conflict started. He said: “In addition to energy, there will be a halt on all other trade between the [Gulf] and the world, which will have a significant effect on the economies of the [Gulf] and all the trading partners around the world.”
The surge in oil and gas prices is set to feed through to higher household energy bills in th UK. Analysts at Cornwall Insight said the energy price cap is on course to rise by £160 to £1,801 in July – more than offsetting the £117 cut coming in April, which was announced by regulators before the US-led strikes on Iran.
The Resolution Foundation went even further, saying the turmoil could add £500 to a typical bill and one percentage point to inflation. Ruth Curtice, chief executive at the think tank, said: “If increases to oil and gas prices are sustained, we could see inflation back at 3 per cent by the summer.”
The Bank of England has cut rates six times since August 2024 The threat of a new inflation shock has shattered hopes of interest rate cuts. The Bank of England has cut rates six times since August 2024 – from 5.25 per cent to 3.75 per cent.
But the chances of another reduction later this month have tumbled from around 80 per cent last week to just 12 per cent. And the National Institute for Economic and Social Research said the next move may in fact be up. It said a “persistent shock to energy prices may force the Bank of England to raise rates back above 4 per cent”.
Helen Miller, director of the Institute for Fiscal Studies, said: “If war in the Middle East drags on, that will be unambiguously bad news for all of us.”
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