By Bloomberg News

(Bloomberg) -- Oil extended gains to more than 10% following attacks on some of the Middle East’s most important energy facilities, raising concerns of an escalating impact from the almost three-week-old conflict that has no end in sight.

Brent spiked past $118 a barrel, while the region’s diesel benchmark was trading north of $180 a barrel at the highest level in almost four years. European natural gas rose as much as 35%.

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Iran attacked a major LNG site in Qatar, one of several energy assets it pledged to target following strikes on the Islamic Republic’s giant South Pars gas field. Saudi Arabia is assessing damage at its Samref refinery and the kingdom also intercepted a ballistic missile heading toward Yanbu — the kingdom’s primary workaround to export oil with the Strait of Hormuz all-but closed.

The attacks have led to huge swings across the oil market. Diesel prices are surging, a sign that the risk of an inflationary spike from the conflict is growing by the day. Prices of physical barrels are rocketing higher as Asian refiners scour the globe for replacement cargoes and US crude discounts are the biggest in over a decade as American barrels lag the rest of the world.

Oil has surged about 50% since the start of the war, which has wrought chaos across the Middle East — choking off Hormuz to shipping and slashing a swath of oil and gas production. However, Iran’s upstream energy industry had been largely spared until now, helping to contain the prospect of an escalation that could have a bigger impact on longer-term supply.

“The war has now clearly entered a phase where energy infrastructure is being directly targeted,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “This marks a new escalation and points to further upside pressure on energy prices in the coming days.”

WATCH: Iran and Israel have traded strikes on energy infrastructure in the Middle East, with little sign of the conflict abating. Bloomberg’s Laura Davison reports on the latest developments. Source: Bloomberg

President Donald Trump said the US didn’t know about Israel’s assault on the South Pars gas field, but threatened to “blow up the entirety” of the deposit with US forces if Qatari assets get hit further. He said earlier this week that targeting oil infrastructure on Iran’s main export hub, Kharg Island, remains on the table following earlier bombing of military targets there.

“The pressure on the Strait of Hormuz means that President Trump cannot simply declare victory and walk away, as that would not resolve the underlying issue,” said Will Todman, senior fellow in Middle East Program at the Center for Strategic and International Studies. “Many of the options President Trump has to increase pressure on Iran would send energy prices even higher, including attempting to seize Kharg Island or striking Iran’s energy production infrastructure.”

Qatar’s Ras Laffan Industrial City — the complex that houses the world’s biggest LNG export plant — suffered “extensive damage” after a missile strike, while a subsequent attack led to a fire, local authorities said.

South Pars is important for supply to Iran’s domestic market as well as to neighboring Iraq and Turkey. Associated oil and petrochemical assets were also struck at Asaluyeh in the Islamic Republic.

Abu Dhabi said it halted operations at its Habshan gas facilities after the interception of missiles resulted in falling debris. Bahrain denied a report by Iran’s semi-official Fars news agency that an LNG refinery was hit.

The US may decide to consider a crude oil export levy or possibly a ban to combat surging energy prices caused by the war, which has helped widen the gap between WTI and the global Brent benchmark, RBC Capital Markets LLC said. The spread has ballooned to a discount of about $17 a barrel.

As part of efforts to combat rising prices, Trump temporarily waived a century-old shipping mandate — the Jones Act — to lower the cost of transporting oil, gas and other commodities around the US. Meanwhile, Vice President JD Vance and other key Trump administration officials plan to huddle with oil executives Thursday.

--With assistance from Charles Gorrivan and Ruth Liao.

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