The global liquefied natural gas (LNG) market has been losing approximately 1.5 million tons of LNG supply each week since the war between the US-Israel and Iran began, according to Wood Mackenzie, as production disruptions in Qatar and the United Arab Emirates (UAE) and ongoing disruptions in the Strait of Hormuz significantly constrain supply.
The LNG market is experiencing one of the most severe supply shocks in its history, as escalating conflict in the Middle East, triggered by attacks between the US, Israel, and Iran, has severely impacted energy infrastructure and shipping routes.
Retaliatory strikes by Iran led to production halts at Qatar's Ras Laffan facility, which has an annual export capacity of 80 million tons, and the UAE's Das Island facility, with a capacity of 4.8 million tons. QatarEnergy, one of the world's largest LNG suppliers, declared force majeure on March 4 and suspended production due to the attacks.
Now in its third week of the conflict, LNG shipments—particularly those passing through the Strait of Hormuz—have nearly come to a halt. It is estimated that around 4 million tons of LNG have failed to reach global markets since the beginning of the crisis.
Conflicting statements from the US and Israel regarding the duration of the conflict, coupled with continued attacks and Iran's targeting of energy infrastructure, have made it difficult to predict when the war will end.
Even if hostilities cease, experts think it may take weeks for Qatar's LNG facilities to resume operations. Qatar alone accounts for roughly 20% of global LNG supply, raising concerns that prolonged disruptions could intensify pressure on both supply and pricing mechanisms worldwide.
Amid the conflict, natural gas prices in both European and Asian markets have risen. In Europe, prices remain elevated compared to pre-conflict levels.
At the Netherlands-based Title Transfer Facility (TTF)—Europe's most liquid gas trading hub—April futures were trading at €31 per megawatt-hour on February 27, a day before the attacks.
Prices surged to as high as €56.4 in the second week of the conflict and currently stand at around €52.
- Japan and South Korea replace cargo while China and India decrease demand
Alex Siow, LNG market lead analyst at ICIS in London, told Anadolu that for LNG, both Japan and South Korea are expected to purchase spot LNG to replace the lost contracted cargoes from Hormuz.
"Japan is in a good position because its reliance on Qatar LNG is not high, but this is slightly trickier for South Korea," Siow said.
"I expect South Korea to be buying more spot LNG and also ramping up its coal generation to replace the lost LNG from Qatar," he added.
India and China will be eliminating their LNG need, a phenomenon referred to as "demand destruction," with these countries having taken similar measures during the 2022 gas crisis, according to Siow.
He explained that China and India would be able to comfortably eliminate 26 million tons and 11 million tons respectively through fuel switching and phased shutdowns in their industrial and commercial sectors.
Meanwhile, Europe imports 9.3 million tons of Qatari LNG—a volume Siow believes can be easily replaced by purchasing US LNG.
"Europe is also a premium market, so they can outbid all other regions, especially those in Asia," Siow noted, adding that the key issue for Europe will be refilling its gas storage, which is currently low but not at historic lows.
"They can take their time, but I figure perhaps by April or so, they will start buying LNG to refill," he said.
- Hormuz crisis has wider effect than in 2022
Wael Hamed Abdel Moati, a global gas market expert at the Organization of Arab Petroleum Exporting Countries (OAPEC), compared the LNG crisis in the Strait of Hormuz to the gas crisis that followed the Russia-Ukraine War in 2022.
Moati noted that while the Russian gas crisis largely affected Europe, this crisis impacted both Asian and European countries, with a larger scope.
He stated that the 2022 crisis led countries to shift from pipeline gas to LNG, but the Strait of Hormuz crisis could have a wider global impact due to increased dependence on LNG and its diverse markets.
Moati pointed out that LNG-producing countries have increased their influence in the market after the Russian gas crisis, and that this crisis has a strong leverage effect on the US to increase its production capacity in the short and medium term.
