The ongoing crisis in the Middle East is sending shockwaves through global energy markets, disrupting natural gas supplies and postponing a much-anticipated surge in liquefied natural gas (LNG) availability, according to the latest quarterly report from the International Energy Agency.
Since early March, shipping disruptions through the Strait of Hormuz have injected unprecedented uncertainty into the market. The route—critical for global energy trade—has effectively been cut off for LNG cargoes, temporarily removing nearly 20% of global supply. The fallout has been immediate: gas prices in both Asia and Europe surged to their highest levels since January 2023, forcing key importing nations to scale back demand.
This sudden upheaval has undone months of gradual market stabilization. During the 2025–26 winter season, increased LNG production—driven largely by new export capacity in North America—had helped ease prices and rebalance supply. Between October and February, global LNG trade rose by 12% year-on-year, while benchmark prices across Europe and Asia dropped by roughly a quarter.
However, extreme winter weather across North America, Europe, and East Asia triggered sharp spikes in demand, highlighting the continued importance of flexible gas supplies—especially as countries integrate more renewable energy sources that depend on weather conditions.
By March, the situation had shifted dramatically. The Middle East conflict led to a de facto shutdown of LNG transit through Hormuz, slashing global LNG production by 8% compared to the previous year. Exports from key producers like Qatar and the United Arab Emirates dropped sharply, with only limited compensation from other regions. As supply chain disruptions deepened, LNG deliveries declined further into April.
Higher prices, combined with milder weather and policy interventions, have since dampened demand in major importing regions. In Europe, gas consumption fell by around 4% year-on-year in March, aided by increased renewable energy generation. Meanwhile, several Asian economies have turned to fuel-switching strategies and demand-reduction measures to cope with the shortfall.
Looking ahead, the consequences could extend well beyond the immediate crisis. Damage to LNG infrastructure in Qatar is expected to slow future supply growth, delaying the global LNG expansion wave by at least two years. The IEA estimates that between 2026 and 2030, the market could lose up to 120 billion cubic metres of LNG supply due to a combination of short-term disruptions and slower capacity growth.
Although new liquefaction projects elsewhere may eventually fill the gap, the agency warns that tight market conditions are likely to persist through 2026 and 2027.
The report underscores the need for sustained investment across the LNG supply chain and stronger international coordination between producers and consumers. It also highlights the value of diversified, long-term supply contracts in helping countries shield themselves from price volatility during periods of geopolitical instability.
