Middle East War Disrupts Global LNG Near‑Term Outlook

Executive summary

The war in the Middle East has delivered a sharp shock to global LNG markets, with tanker traffic through the Strait of Hormuz effectively halted and a significant portion of global LNG supply temporarily disrupted. According to S&P Global Energy’s Global LNG Near-Term Outlook – March report, the immediate impact has been felt most acutely in Asia‑Pacific markets, while Europe and other regions adjust through price signals and cargo diversions. The near‑term outlook underscores heightened price volatility, regional divergence, and sensitivity to the duration of the disruption. 

How the Middle East war is affecting global LNG supply

The report describes the war in the Middle East as an unprecedented shock to LNG markets, driven primarily by the effective closure of the Strait of Hormuz. As of early March, LNG tanker traffic through the strait had halted, cutting off a substantial share of global LNG flows.

Key supply disruptions outlined in the report include:

• Temporary shutdowns of LNG facilities in Qatar and the UAE, including the Ras Laffan complex, with force majeure declared to affected buyers.
• An estimated reduction of up to 355 million cubic meters per day of LNG supply from Qatar and the UAE combined.
• Additional gas supply disruptions stemming from Israeli upstream shutdowns, affecting pipeline flows to Egypt and Jordan.

The report emphasizes that the scale of disruption reflects LNG’s reliance on a narrow set of export corridors and highlights the market’s vulnerability to geopolitical shocks in critical transit routes.

LNG prices react sharply to supply disruption

The immediate market response to the supply shock was a sharp rally in LNG prices. The report notes that Asian spot LNG prices, as assessed by Platts JKM, surged sharply following the disruption, reaching levels not seen since the winter of 2024–25. European LNG prices also rose, briefly placing Europe in a netback‑premium position for attracting flexible Atlantic cargoes.

As the situation evolved, price dynamics began to reflect regional competition for limited supply. The report indicates that Asia is likely to outbid Europe for incremental cargoes if the disruption persists, given Asia’s heavier reliance on affected Middle Eastern volumes. 

Asia‑Pacific bears the brunt of the near‑term impact

According to S&P Global Energy’s Global LNG Near-Term Outlook report, Asia‑Pacific markets are disproportionately exposed to the closure of the Strait of Hormuz. A large majority of QatarEnergy and ADNOC LNG exports have been destined for Asia‑Pacific markets, making the region particularly vulnerable to supply interruptions.

The report highlights varying degrees of exposure across Asian markets:

• South Asian buyers such as India, Pakistan, and Bangladesh rely heavily on Qatari and UAE LNG and face limited storage capacity, increasing the risk of demand curtailment if high prices persist.
• Mainland China is more diversified, with domestic production, pipeline imports, and coal‑fired generation providing flexibility to absorb short‑term LNG losses.
• Japan and South Korea entered the disruption with relatively comfortable storage levels, reducing immediate spot market requirements.
• Across the region, buyers are expected to prioritize fuel switching and demand management before turning to expensive spot cargoes.