First glance

Israel-Hamas war: implications for gas markets

The conflict has already cut gas supplies to Israel and could start to have wider impacts by weighing on exports

Publishing date
19 October 2023
Gas pipeline

The Israel-Hamas war is already hitting gas supplies, most notably in Israel. Following the Hamas attacks, on 9 October Israel’s Energy Ministry ordered Chevron, the operator of the Tamar platform 25 kilometres northwest of Gaza, which mostly met domestic needs, to temporarily cease production. On 10 October, Israel’s government also instructed Chevron to temporarily halt flows through the most important pipeline connecting Israel and Egypt, the East Mediterranean Gas (EMG) pipeline, which links Ashkelon, an Israeli city 13 km north of Gaza, to Arish in the northern Sinai, Egypt.

Israel’s energy ministry has also indicated that electric utilities in Israel should seek alternative fuel sources to meet their needs. The share of gas in the country’s energy mix is about 40%, up from zero in 2000. This rapid expansion has been driven by the electricity generation sector, previously dominated by coal; gas now provides 70% of Israel’s electricity.

The discovery of offshore gas deposits, most notably of the Tamar field in 2009 and the Leviathan field in 2010, has underpinned this major transformation of Israel’s energy system, and has also led Israel to become an exporter of gas to Egypt and Jordan. In 2022, Israel produced 21.9 billion cubic metres (Bcm) of gas, 11.4 Bcm from Leviathan and 10.2 Bcm from Tamar. Of this, 12.7 Bcm was consumed domestically, while 5.8 Bcm was exported to Egypt and 3.4 Bcm to Jordan. Exports were expected to rise further in 2023 supported by the launch of production at the Karish field (initial output of 6.5 Bcm).  

It is not the first time the Tamar platform has been shut down over a security threat. It was targeted by rockets in 2021. Increased security risks to the key exporting EMG pipeline, which starts just kilometres from border with Gaza, led to its temporary shut down and impacted Israeli gas exports to Egypt from its biggest gas field, Leviathan. Reduced flows were redirected via an alternative regional pipeline used originally for Egyptian exports and, from 2019, to supply Egypt and Jordan with gas, known as Arab Gas Pipeline.

The impact of the current situation on the domestic, regional and international gas balance will ultimately depend on its duration. If protracted, the Tamar and EMG shutdown would reduce more long-lastingly not only supplies to Israel but also exports to Egypt. This would undermine Egypt’s ability to satisfy its increasing domestic gas needs, and would also hit its LNG exports to Turkey and several European Union countries – already significantly down this year compared to 2022.

Egypt’s LNG exports totalled about 7 million tonnes in 2022, of which 5 million tonnes went to the EU, compared to total EU imports of 96 million tonnes and global trade in LNG of over 400 million tonnes. Nevertheless, in a very tight global LNG market, the prospect of losing the relatively small Egyptian supplies at the beginning of winter has created upward pressure on gas prices across Europe and Asia. Gas prices are already under pressure from other factors, including the alleged sabotage of the Baltic connector between Finland and Estonia, and strikes at some Australian LNG plants.

Then there is the risk of further regional escalation of the conflict. A more extensive conflict between Israel and the Arab states could complicate planned – and in an extreme case, even current – Israeli gas projects with Egypt, Jordan and Lebanon. Such a scenario would make energy cooperation in the Eastern Mediterranean format much harder, if not derail it completely. Cooperation is meant to enable new gas developments, create a major regional hub and to build confidence in the region. More sustained limits on Eastern Mediterranean export capabilities would be a setback, especially for EU countries such as Italy, which rely on supplies from the region in their strategy to move away from Russian gas imports, and whose companies are investing in production and export infrastructure in the Eastern Mediterranean.

Finally, from a broader perspective, similarly to oil markets, if the conflict escalates all eyes will be on potential Iranian involvement. This could have several implications for international gas flows, such as increased security risks for that LNG vessels that pass every day through the Strait of Hormuz, and for international gas pipelines in the region. Wider conflict would also add to concerns about the security of infrastructure connecting North African gas suppliers and Europe, adding uncertainty and volatility to an already tight market. 

About the authors

  • Agata Łoskot-Strachota

    Agata Łoskot-Strachota is a Visiting fellow at Bruegel. She is also a Senior fellow at the Centre for Eastern Studies (OSW) focusing on energy policy. For the past number of years, Agata has coordinated OSW’s research work on the European gas market and acted as a senior analyst for European Union energy policy. Her areas of expertise include the oil and gas sectors of Russia and countries of the Caspian region, Central, Eastern and Southern Europe and the Balkans; the energy dimension of international relations and energy policy in the EU and the post-Soviet area.

  • Simone Tagliapietra

    Simone Tagliapietra is a Senior fellow at Bruegel. He is also a Professor of EU Energy and Climate Policy at The Johns Hopkins University - School of Advanced International Studies (SAIS) Europe.

    His research focuses on the EU climate and energy policy and on the political economy of global decarbonisation. With a record of numerous policy and scientific publications, also in leading journals such as Nature and Science, he is the author of Global Energy Fundamentals (Cambridge University Press, 2020) and co-author of The Macroeconomics of Decarbonisation (Cambridge University Press, 2024).

    His columns and policy work are widely published and cited in leading international media such as the BBC, CNN, Financial Times, The New York Times, The Economist, The Guardian, The Wall Street Journal, Süddeutsche Zeitung, Frankfurter Allgemeine Zeitung, Corriere della Sera, Le Monde, El Pais, and several others.

    Simone also is a Member of the Board of Directors of the Clean Air Task Force (CATF). He holds a PhD in Institutions and Policies from Università Cattolica del Sacro Cuore. Born in the Dolomites in 1988, he speaks Italian, English and French.

Related content