With its ample offshore natural gas resources, Israel has long dreamed of establishing itself as a major energy player in the Eastern Mediterranean, and in its more ambitious moments, even becoming a key supplier to Europe. But as the country reels from a devastating surprise attack by the Islamist militant group Hamas, the prospect of a full-blown war threatens to roil global energy markets, especially impacting the gas supply in the neighborhood—and with it, Israel’s energy ambitions.
In the wake of Hamas’s weekend attack, European natural gas and global oil futures shot up by 14 percent and 4 percent respectively, reflecting wider uncertainty and fears of an intensifying conflict. Oil shot up because there are worries, again, that Iran might close the Strait of Hormuz, the chokepoint for nearly a third of seaborne oil. Natural gas prices went up firstly because Israel shut down a big offshore production platform in missile range of Gaza, and secondly because a pipeline in the Baltic mysteriously developed a hole, which Estonian officials attributed to “external” actors.
As fighting worsened on Monday, Israel asked Chevron to shut down production at the Tamar offshore field, which accounts for about half of Israeli domestic gas and is also a source of gas for Egypt and Jordan. There are bigger Israeli offshore fields, which are as yet unaffected, as well as smaller ones, but the onshore war is already having offshore effects.
“The future was bright for Israel, in terms of being a regional and even a global player” in the natural gas sector, said Sohbet Karbuz, an energy expert at the Mediterranean Observatory for Energy. The problem for now is that Israel is going to get gas from somewhere else, which could result in tankers full of liquified natural gas being diverted. And that means that prices are going to rise in Europe, as they already have, with natural prices hitting six-month highs on Wednesday.
“If the issue escalates, it would also be a problem for the global oil and gas market,” Karbuz said. “It will not remain regional.”
The war is already entangling other actors, with the Lebanese militant group Hezbollah firing missiles at Israel amid reports that Iran backed Hamas with military training, logistic assistance, and tens of millions of dollars in financial support for weapons. In an effort to send a “message of solidarity and support,” Washington also dispatched U.S. Secretary of State Antony Blinken to Israel today, according to U.S. officials, in addition to the carrier group already in the Eastern Mediterranean and the second one coming to support it.
If the fighting expands to involve other countries, energy analysts warn of an escalating conflict that could send shock waves through global energy markets and disrupt key supply lines while inflicting a devastating human toll. Beyond impacting Israel’s natural gas industry, which in the past decade has become a pillar of the country’s economy and energy security, the war also threatens to drive up oil prices and derail international shipping in the strategically vital Strait of Hormuz if Iran becomes directly involved.
“The market is watching very closely, much more because of the potential for spillover and the risks of what either a wider conflict or a shift in regional diplomacy could have for energy supplies,” said Richard Bronze, the co-founder of Energy Aspects, a London-based energy consultancy.
Israel appeared to be bracing for potential attacks on its natural gas infrastructure this week, prompting the decision by officials to order Chevron to close Tamar. On Tuesday, Chevron also announced that it had stopped exporting natural gas through a key subsea pipeline running between Israel and Egypt.
The move will likely be temporary. Robin Mills, the CEO of Qamar Energy, said he expected that Israel will likely shut down Tamar for a few days as a precautionary measure before reactivating it again. But in the long run, he added, the conflict could hamper international investment into the country—potentially slowing, or even disrupting, Israel’s future plans to build out its natural gas sector.
“Oil and gas majors are always weighing one location up against a few others when they decide where to invest,” said Jim Krane, a research fellow in energy geopolitics at Rice University’s Baker Institute for Public Policy. “If there’s too much political risk, that’s one of the biggest things that frustrates investment.”
The Tamar field is the main source of Israeli natural gas exports to Egypt, and shipments to Cairo have plummeted by 20 percent in the wake of Chevron’s closure. Experts warn that a prolonged shutdown could compound political pressures on Egypt, which has already been struggling to cope with severe natural gas shortages that have triggered rolling blackouts and public frustration. Israeli gas was meant to fuel not just Egyptian industry, but also Egyptian exports of liquified natural gas.
“If you look at the falls of both of the governments [of former Egyptian President Hosni] Mubarak and then [former Egyptian President Mohamed] Morsi, they happened during periods of extensive electricity blackouts in Egypt,” said Brenda Shaffer, an energy expert at the U.S. Naval Postgraduate School and a specialist in Eastern Mediterranean energy issues. “It has a lot of political implications.”
Israel’s closure of the Tamar field reflects how critical energy infrastructure is increasingly seen as a pressure point in times of conflict, prompting governments to scramble to plug vulnerabilities. Since Russia invaded Ukraine in February 2022, the war has been marked by attacks on the Zaporizhzhia nuclear power plant and the Nova Khakovka dam. Energy itself is weaponized, too: Russia has destroyed all sorts of Ukrainian energy facilities, while Israel responded to the Hamas attack by severing Gaza’s water, electricity, and fuel supplies, sparking fears of a deepening humanitarian crisis.
In one of the most high-profile cases, the Nord Stream pipelines between Russia and Germany were sabotaged last September, though it is still unclear who did it. And the Baltic has been busy with another incident: Finnish and Estonian authorities are now investigating what they believe is a likely sabotage attack on an undersea gas pipeline and communications cable between the two countries, further intensifying the uncertainty in global gas markets and the scrutiny of infrastructure defenses. On Wednesday, NATO vowed to launch a concerted response if the attack is confirmed as deliberate.
“The important thing now is to establish what happened and how this could happen,” said NATO Secretary-General Jens Stoltenberg. “If it is proven to be a deliberate attack on NATO-critical infrastructure, then this will be, of course, serious, but it will also be met by a united and determined response from NATO.”
