Middle East Crisis Disrupts Natural Gas Markets and Delays LNG Supply Growth

Middle East Crisis

Middle East: The Middle East conflict has caused a major disruption in global natural gas markets, particularly due to the effective closure of the Strait of Hormuz, a key transit route for LNG shipments. This has removed nearly 20% of global LNG supply from the market, leading to a sharp tightening of supply conditions. Global LNG production declined by around 8% year on year, while exports from major producers such as Qatar and the United Arab Emirates dropped significantly. The supply shock resulted in increased price volatility, with gas prices in Asia and Europe rising to their highest levels since early 2023, which in turn reduced demand in key importing regions.

The disruption is also expected to impact the medium-term outlook, delaying the anticipated wave of new LNG supply that was projected for the second half of the decade. The IEA estimates that cumulative LNG supply losses could reach around 120 billion cubic metres over the 2026 to 2030 period, equivalent to approximately US$36-48 billion based on current global gas price ranges. Damage to LNG infrastructure and delays in expansion projects, particularly in Qatar, are expected to push back supply growth and prolong tight market conditions through 2026 and 2027. While increased production from other regions may partially offset losses over time, the global gas market is expected to remain under pressure in the near term due to ongoing geopolitical uncertainty and constrained supply expansion.

Source: International Energy Agency