The Israel-Hamas war is hampering Israel's gas exports, in particular to Egypt and Jordan, and could eventually hurt credit quality in the region if it escalates further.

In a report published "Regional Gas Is More Exposed Than Oil To War In The Middle East," S&P Global Ratings says it assumes the war will remain centered in Gaza and have a low impact on Israel's neighbors, but if it spreads to important delivery channels, Egypt--which is already rationing gas--might struggle in the medium term.

The war between Israel and Hamas has already taken a heavy toll on the population and damaged infrastructure.

Gas production at the Tamar plant was halted due to its proximity to Gaza after the decades-long conflict escalated on October 7.

According to the report, production resumed on November 9, but the shutdown illustrates the potential repercussions of the war for Israel's gas projects and importers of Israeli gas.

Since 2020, Israel has provided almost all of Jordan's natural gas supply and 5 per cent-10 per cent of Egypt's, according to S&P Commodity Insights data.

Yet S&P Global Ratings believe Egypt's gas supply is more exposed than Jordan's because Jordan has an unused LNG plant and an offtake agreement with Israel.

Further escalation, also spreading beyond Israel's borders, could involve damage to pipelines or obstruction of shipping in the Strait of Hormuz.

According to S&P Global Ratings , if further escalation, Israel's gas exports could stop completely. And many producers in the Gulf Cooperation Council might not be able to fill that gap, since most of their gas production is already under contract. This could leave Egypt facing a long-term shortage at a time when supply is already tight. 

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