From Dubai: The regional dynamics at play are more complex than the headlines suggest. What began on Saturday as a coordinated US-Israeli operation to eliminate Iran's nuclear and ballistic missile capabilities has, within 72 hours, become the most consequential rupture to global energy markets since the Russian invasion of Ukraine. For Australian households already squeezed by elevated energy costs, and for the LNG exporters who underpin much of our export revenue, the next few weeks may prove defining.
The immediate trigger was the death of Iranian Supreme Leader Ayatollah Ali Khamenei. Iranian state media announced early on Sunday that Khamenei was killed after US and Israeli military strikes on Iran on Saturday. President Donald Trump then called for regime change following the massive US and Israeli attack, which prompted an unprecedented wave of retaliatory strikes by Iran. Speaking at the Pentagon on Monday, Trump said the US-Israeli operation in Iran could be a "four-week process" and he expects more American casualties after three troops were killed in action.
US Defence Secretary Pete Hegseth used his first press briefing since the strikes to push back against comparisons with prolonged interventions in Iraq and Afghanistan, declaring the mission had a "clear, devastating, decisive" purpose: to destroy Iran's missile threat, its navy, and any path to nuclear weapons. Yet when pressed for specifics about objectives, timelines, or what success would look like, he declined to answer, citing operational security. The absence of a publicly articulated exit strategy is the single most serious question hanging over this conflict.
Iran has responded with force across the entire region. Iran has fired missiles and drones at Israel as well as at regional countries that host US allies or military bases, including Bahrain and Qatar. Three American service members have been killed and casualties are reported in the UAE, Israel and Kuwait as Israel and Iran continue to trade strikes. In Lebanon, Hezbollah fired missiles at Israel for the first time in more than a year, prompting Israeli retaliatory strikes on Beirut's southern suburbs. Lebanon's government has decided on an "immediate ban" of Iran-backed Hezbollah's military and security activity, prime minister Nawaf Salam said Monday, in an unprecedented move as Israel retaliated to rocket fire.
The Energy Crisis Is Already Here
For Australia's energy sector, this signals a period of acute volatility unlike anything seen in years. The most dramatic development came from Doha on Monday: "Due to military attacks on QatarEnergy's operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of liquefied natural gas and associated products," the world's largest LNG producer said in a statement. Qatar's Defence Ministry confirmed two Iranian drones had targeted the sites; one hit an energy facility in Ras Laffan Industrial City, located 80 kilometres north of Doha, while the other struck a water tank at a power plant in Mesaieed, 40 kilometres south of the capital.
QatarEnergy's Ras Laffan plant covers about a fifth of global LNG supply, and the unprecedented halt now threatens energy security worldwide. The reaction in European gas markets was immediate and severe. Benchmark Dutch TTF natural gas futures climbed 49.1% to €47.65 per megawatt-hour by early afternoon, while UK natural gas futures for April delivery rose 45.6% to 113.44 pence per therm. Oil prices surged 13% to above $82 a barrel, the highest since January 2025, as the conflict ground shipping to a near halt in the Strait of Hormuz, through which a fifth of global oil supply passes.
Saudi Arabia's Ras Tanura refinery, which has a processing capacity of more than half a million barrels of crude oil per day, was attacked by Iranian drones and shut down as a precaution. Iran's attack on the Ras Tanura refinery represents a major escalation, with Iran demonstrating that key Gulf energy infrastructure is within its reach, and investor sentiment likely to worsen. A drone also struck an oil tanker in the Gulf of Oman, killing one mariner, and several ships have been attacked near the Strait of Hormuz. Tanker traffic through the Strait of Hormuz, which carries about 20% of global oil supply and 80 million tonnes of LNG annually, has ground to a near halt.
What Western coverage frequently misses is how profoundly this affects Australia's strategic position as a leading LNG exporter. About 60% of global LNG imports come from only three countries: Australia, Qatar, and the US, sometimes dubbed the "LNG Trinity." A prolonged shutdown of Qatari supply tightens the market sharply, likely boosting spot prices for Australian cargoes in the near term. Global energy buyers, including major Asian and European importers locked into long-term contracts with QatarEnergy, now face an unprecedented supply gap that could reverberate through markets and energy security planning. Australian exporters, selling largely under long-term contracts to Japan, South Korea, and China, will feel a complex mix of short-term price upside and long-term contract renegotiation pressure.
No Clear Exit, and Growing Pressure on Allies
The diplomatic stakes are rising quickly. Britain, France, and Germany have said they are ready to assist the US in stopping Iranian attacks, though none has committed forces. The US, Bahrain, Jordan, Kuwait, Qatar, Saudi Arabia, and the UAE issued a joint statement condemning Iran's attacks and affirming their right to self-defence. Inside Iran, the picture is opaque. Tehran's streets have largely emptied under ongoing airstrikes, and anonymous accounts from inside the country speak of shock and uncertainty rather than any sign of the popular uprising that Trump appeared to be hoping for when he urged Iranians to "take over" their government.
Those who argue the US-Israel strikes were a necessary strategic intervention point to the genuine threat posed by Iran's nuclear ambitions and its decades-long support for proxy forces across the region. Iran's arsenal of ballistic missiles, the reach of Hezbollah, the presence of Iraqi Shiite militias, and the Houthi threat to Red Sea shipping all represent real security burdens on America's allies and on global trade. From that perspective, the argument runs, deterrence had failed and a more decisive blow was the only option left.
Critics, however, raise legitimate and urgent questions. Iran's ambassador to the UN alleged that the strikes targeted civilian infrastructure and killed more than 100 children at a school. Iran's Red Crescent Society reported at least 555 people killed in the US-Israeli operation. The absence of any articulated political pathway out of the conflict, combined with Trump's suggestion that Iran's population might simply overthrow their government under bombardment, reflects a historical pattern in which military force without a credible political strategy produces prolonged instability rather than resolution. The precedent of Iraq, which Hegseth himself invoked only to dismiss, casts a long shadow.
The energy market implications extend well beyond the region. "The key question for the global economy is obvious: Will the Strait of Hormuz be effectively closed for oil and gas exports for more than a few weeks?" one economist noted. "If so, it would hurt global growth and raise global inflation noticeably." Some analysts forecast oil prices would return to $65-$70 per barrel after a near-term spike, provided the conflict does not deepen further. Others warn that "if we start to see additional direct attacks against energy infrastructure, not just in Saudi Arabia and Kuwait, but in other countries in the region, that's when the market will start to think about a push toward $90 and perhaps even beyond."
For Australia, the picture is layered. Higher spot LNG prices offer a short-term revenue boost for producers operating out of Western Australia and Queensland. But sustained energy price inflation feeds directly into domestic costs for businesses and households, at a time when the Reserve Bank of Australia is carefully managing the pace of rate reductions. Any renewed inflation shock from energy would complicate that task considerably. Australia's Department of Foreign Affairs and Trade will also be monitoring the fate of the roughly 40,000 Australians estimated to be in the broader Middle East region, with Dubai airports having only partially resumed operations as of Monday evening local time.
The regional dynamics here will not resolve quickly. Iran has signalled it will not negotiate with the United States under current conditions, with senior official Ali Larijani posting on X that talks are off the table. Iran's Islamic Revolutionary Guard Corps said missiles and drones were used in a sixth wave of retaliatory attacks, vowing to continue warfare in response to the US-Israeli offensive. The conflict has already drawn in Lebanese armed factions, Iraqi militias, and produced a diplomatic rupture across the Gulf. Whether it produces a shorter, decisive outcome or a protracted regional war will depend less on military capability, which the US demonstrably has in abundance, and more on whether anyone in Washington has a credible answer to the morning after. That question remains conspicuously unanswered.