Lhe developments in the war between Israel and Hamas are being closely followed by energy markets, as it raises geopolitical risks for oil and gas in an already tense global market situation. The conflict is already affecting Israeli oil and gas supplies.
As far as oil is concerned, it is mainly a question of diverting flows, Israel being neither a producing country nor a transit country. Hamas attacks have destroyed the country’s largest oil import terminal, Ashkelon, and tankers are sailing to another terminal. This makes it more difficult for oil from Black Sea exporters (mainly Kazakhstan, Azerbaijan and Iraq) to reach the Israeli market through the Mediterranean.
Israel’s gas supply is even more severely affected. Following the Hamas attacks, the country was forced, for security reasons, to stop production at one of its gas fields off the Mediterranean, the Tamar field. This is important because gas represents 40% of Israel’s energy mix and 70% of its electricity generation. The closure of the Tamar field initially pushed Israeli electricity companies to look for other sources of energy to meet needs.
Sabotage and strikes
With the continuation of the conflict, Israel has also cut off almost all of its exports to Egypt. This situation compromises Egypt’s ability to meet its growing domestic gas needs and harms its exports of liquefied natural gas (LNG), which have already declined significantly this year compared to 2022, to Turkey and several countries in the European Union.
Currently, Egypt has de facto stopped all its exports and has even started importing LNG again. Egyptian LNG exports totaled around 7 million tonnes in 2022, including 5 million tonnes to the European Union (EU), while total EU imports stand at 96 million tonnes.
Nevertheless, in a very tight global LNG market and continued uncertainty, the prospect of losing relatively small Egyptian supplies at the start of winter has created upward pressure on gas prices across Europe and the Asia. Gas prices are already under pressure from other factors, including the alleged sabotage of the Balticconnector gas pipeline between Finland and Estonia, and strikes at some Australian LNG plants.
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