Israel Shuts Down Leviathan Natural Gas Field: Update on Impacts and Risks for Customers and Regional Markets

Energy News Beat

Israel’s decision to temporarily halt operations at its Leviathan and Karish offshore natural gas fields, announced earlier this month, continues to ripple through regional energy markets. The shutdown, prompted by security concerns amid escalating tensions with Iran, has disrupted a critical energy supply chain, affecting Israel’s domestic customers and key export markets, notably Egypt. As the situation evolves, the potential for a prolonged shutdown raises significant concerns about energy security, industrial output, and economic stability in the region. This article provides an update on the impacts on Israel’s customers, the risks of an extended closure, and the cascading effects on Egypt’s fertilizer market and other industries.

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Background: Why the Shutdown?

Israel’s Ministry of Energy and Infrastructure ordered the suspension of operations at the Leviathan and Karish gas fields in early June 2025, citing security risks tied to the ongoing Israel-Iran conflict. The Leviathan field, a cornerstone of Israel’s energy infrastructure, supplies roughly 40% of the country’s domestic natural gas and supports significant exports to Egypt and Jordan. Karish contributes another 20-25% to Israel’s gas output. The fields were taken offline as a precautionary measure following reports of Iranian missile strikes targeting energy infrastructure, including alleged damage to the Leviathan platform and the Bazan oil refinery in Haifa.

While initial reports suggested the shutdown would be temporary, the lack of a clear timeline for resuming operations has heightened concerns about the broader implications for Israel and its regional partners.

Impact on Israel’s Customers

The immediate impact of the shutdown has been felt across Israel’s domestic energy sector. With Leviathan and Karish offline, Israel has lost approximately two-thirds of its natural gas supply, forcing power plants to pivot to costlier and less efficient alternatives like diesel. This shift has driven up electricity production costs, which could translate to higher utility bills for consumers and businesses if the shutdown persists.

Industrial sectors, including manufacturing and petrochemicals, are also under strain. Natural gas is a critical feedstock for many Israeli industries, and prolonged disruptions could lead to reduced output or temporary closures. Small and medium-sized enterprises, already grappling with inflationary pressures, may face significant financial challenges if energy costs continue to rise.

On the export front, Egypt and Jordan, which rely on Israeli gas to meet domestic demand, are facing acute shortages. Egypt, in particular, has been hit hard, as it imports around 1 billion cubic feet per day (bcfd) from Leviathan. The loss of this supply has triggered power outages lasting several hours in parts of Egypt, exacerbating an ongoing energy crisis. Jordan, while less dependent, is also exploring alternative fuel sources to bridge the gap.

Risks of a Prolonged Shutdown

A longer shutdown of the Leviathan and Karish fields poses significant risks for Israel and its customers. Key concerns include:

Energy Price Volatility: Israel’s reliance on diesel and imported fuel oil to replace natural gas is already driving up costs. A prolonged shutdown could exacerbate price spikes, particularly if global oil markets tighten due to concurrent geopolitical tensions.
Economic Fallout: Higher energy costs could fuel inflation in Israel, squeezing household budgets and business margins. The industrial sector, which employs a significant portion of the workforce, may face layoffs or reduced investment if operations are curtailed.
Regional Energy Security: Egypt and Jordan’s dependence on Israeli gas highlights the fragility of regional energy interdependence. A prolonged disruption could strain diplomatic ties and prompt these countries to seek costlier alternatives, such as liquefied natural gas (LNG) imports, which Egypt is already pursuing.
Infrastructure Vulnerabilities: Reports of damage to the Leviathan platform and the Bazan refinery suggest that restarting operations may require significant repairs. If the conflict escalates, further attacks could delay recovery efforts, prolonging the crisis.

Impact on Egypt’s Fertilizer Market

Egypt’s fertilizer industry, a cornerstone of its agricultural economy, is particularly vulnerable to the gas supply disruption. Natural gas is a primary feedstock for producing ammonia, a key component of nitrogen-based fertilizers like urea. With Leviathan offline, Egypt has halted gas supplies to its industrial sector, including fertilizer plants, to prioritize power generation.

The shutdown of fertilizer production is already causing alarm in Egypt, where agriculture supports millions of livelihoods. Domestic fertilizer prices have surged, and farmers are struggling to secure supplies ahead of the planting season. Egypt, a significant exporter of fertilizers to Africa and the Middle East, may also see its trade revenues decline if production remains constrained. A prolonged disruption could lead to fertilizer shortages across the region, driving up global prices and exacerbating food security concerns in import-dependent countries.

Other Affected Markets

Beyond fertilizers, several other markets are feeling the pinch of the Leviathan shutdown:

Petrochemicals: Egypt’s petrochemical industry, which relies on natural gas for products like plastics and synthetic fibers, is facing production cuts. This could disrupt supply chains for consumer goods and industrial materials across the Middle East.
Power Generation: Egypt’s pivot to diesel and mazut (heavy fuel oil) for power plants is straining its fuel oil reserves and increasing import costs. This shift also raises environmental concerns, as mazut is more polluting than natural gas, potentially worsening air quality in urban areas.
LNG Markets: Egypt’s scramble to secure 290 LNG cargoes to offset the loss of Israeli gas is putting upward pressure on global LNG prices. This could impact energy costs in Europe and Asia, where LNG demand is already high.
Regional Trade: Jordan’s industrial sector, particularly cement and steel production, may face higher energy costs, reducing its competitiveness in regional markets. Similarly, Israel’s chemical and pharmaceutical industries, which rely on stable energy inputs, could see export declines if the shutdown persists.

Recent Developments

As of June 23, 2025, there are no confirmed reports of the Leviathan or Karish fields resuming operations. Israeli officials have remained tight-lipped about the extent of the damage or a timeline for recovery, citing security concerns. Meanwhile, Egypt has accelerated efforts to secure alternative fuel supplies, including negotiations for additional LNG imports and increased domestic oil production.

Posts on X suggest growing public frustration in Egypt, with some users reporting power outages lasting up to six hours in major cities. In Israel, energy analysts are urging the government to provide clarity on the shutdown to stabilize markets and reassure investors. However, the ongoing conflict with Iran continues to cast a shadow over recovery efforts.

Conclusion

The shutdown of Israel’s Leviathan and Karish gas fields has exposed the fragility of regional energy systems, with far-reaching consequences for Israel, Egypt, Jordan, and beyond. While Israel grapples with domestic energy shortages and rising costs, Egypt’s fertilizer and petrochemical industries face severe disruptions that could ripple through global agricultural and industrial markets. The risks of a prolonged shutdown—higher energy prices, economic instability, and strained regional ties—underscore the urgency of resolving the crisis.

As the situation unfolds, stakeholders will be closely monitoring Israel’s next steps and the broader geopolitical dynamics. For now, the region remains on edge, bracing for the potential fallout of an extended energy crisis.

For updates on this developing story, visit Energy News Beat