Supply shock squeezes Mediterranean LNG balances

The Mediterranean could become a critical demand center for Atlantic Basin LNG, as supply outages in the Middle East and the effective closure of the Strait of Hormuz could force buyers in Southern Europe and Turkey to compete more aggressively for flexible cargoes, potentially reshaping regional price signals and global trade flows.

The combined impact of Iranian strikes on Qatari infrastructure and the halt of vessel traffic through Hormuz has removed a significant portion of flexible LNG supply from the global system, tightening prompt availability into Southern Europe and the Mediterranean, market participants said.

Qatar has exported a total of 1.79 million mt to Europe so far in 2026, compared to 2.1 million mt during the same period in 2025, according to S&P Global Energy CERA data. Of that volume, 630,000 mt was sent to Mediterranean destinations, down 47.9% from 1.21 million mt over the same period a year ago.

Platts assessed the Mediterranean marker at $17.436/ MMBtu, a 3-cent discount to NWE. The Platts East Mediterranean Marker was assessed at $17.666/MMBtu, or at a 20 cent premium to NWE.

Prices have retreated from recent peaks but remain elevated. On March 19, the Med marker surged to $20.728/MMBtu and EMM to $20.978/MMBtu, according to Platts, part of S&P Global Energy, data following news of missile strikes on Qatar's Ras Laffan Industrial City, the country's key LNG export hub.

Supply shock tightens prompt availability

With Qatari volumes curtailed and shipping constraints limiting flows through the Strait of Hormuz, market participants said spot and flexible LNG availability into the Mediterranean Basin had sharply decreased.

The disruption has shifted attention toward Atlantic Basin suppliers, particularly the US, as the primary source of incremental cargoes. Traders said buyers in Italy, Greece and Turkey have stepped up their presence in the spot market, intensifying competition for prompt deliveries.

This shift risks redrawing traditional arbitrage flows, with Mediterranean demand potentially pulling cargoes away from other price-sensitive regions.

Tukey's role

Turkey is expected to play an increasingly pivotal role in the Mediterranean LNG balance in the coming weeks.

Turkish energy minister Alparslan Bayraktar said March 25 gas flows from Iran to Turkey have been halted and mentioned the country has diversified their supply sources. Cuts from the region have become a seasonal norm for Turkey over the past few years. For example, Iran completely halted gas exports to Turkey between January and February 2025.

Data from CERA shows that Turkey has imported 6.21 million metric tons of LNG so far in 2026. This is the highest level since Q1 2024, when Turkey imported 6.22 million mt over the first three months of the year.

However, near-term demand signals are mixed, with some traders noting that Turkey may have sufficient supply coverage in the short term.

"Hearing that Turkey might not have to buy till June because till June they have still storage from the Israel flows. In June maybe they need to buy something but not huge demand," said an Atlantic-based trader.

This could further tighten balances as June is Europe's summer injection season, when countries seek to refill storage.

Demand destruction

While Europe will be looking to compete for additional spot cargoes this summer to replace the lost Qatari volumes and refill its underground storage, the high price environment could lead to some level of demand destruction, sources said.

Europe was likely to import more cargoes of LNG than the record high seen last year, traders said, however, with 20% of global supply cut and flat prices remaining elevated, it may push buyers to seek alternatives such as pipeline gas.

Current narrow LNG-TTF spreads may incentivize more pipeline purchases over the summer as LNG prices are out of the money versus gas. LNG was at a 35 cents/MMBtu discount to the May TTF hub futures price on March 25

Additionally, Italy should be able to replace some 85% of its missing 6.4 billion cubic meters per year of Qatar LNG volumes within 12 months using a mixture of renewable switching and electrification, Italian think tank Ecco said in a report March 24,

Renewable growth could replace 2.5 Bcm/year of Italian gas demand, according to the group's calculations, while biomethane could cover 0.6 Bcm/year, and other energy measures a further 2.4 Bcm/year, it estimates.

The remaining 1 Bcm/year would need to be replaced with like-for-like gas imports through existing infrastructure, according to the report.