Asian Economies Hit with $7.4 Billion LNG Price Shock

India and four other major emerging Asian economies have spent $7.4 billion on spot liquefied natural gas (LNG) after disruptions to shipments through the Strait of Hormuz, more than double the cost of comparable supplies purchased under long-term contracts a year earlier.

The immediate price shock is exposing a wider weakness in the region’s energy model: imported LNG can appear reliable until a geopolitical disruption turns procurement into a competition for expensive replacement cargoes.

Pakistan, previously viewed as a high-growth LNG market, is likely to increase its reliance on solar and hydropower because of the impact of the Hormuz disruption. Bangladesh has spent more than $2 billion replacing lost Qatari LNG supplies and is offering incentives for rooftop solar installations.

The crisis is simultaneously changing how buyers think about procurement. Around 80% of buyers surveyed by McKinsey expect to change their procurement strategies, with greater geographical diversification becoming a priority over the next few years.