India has prioritized city gas supplies amid the Middle East conflict by reducing deliveries to fertiliser plants, refineries, and industrial users. This strategy has shielded urban consumers from disruptions caused by the closure of the Strait of Hormuz, which has impacted liquefied natural gas (LNG) shipments. According to consultancy Wood Mackenzie, South Asia's LNG demand is now expected to fall by about 6 million tonnes in 2026, reversing earlier projections of a 2.7 million tonne growth.
The disruption has forced governments to ration gas, seek expensive replacement cargoes, and absorb fiscal costs. India managed to sustain fertiliser production through government subsidies, achieving record urea output in May and June. However, LNG tender award prices surged from $16.8-$18.8 per million British thermal units (mmBtu) in March-June to $26.4 per mmBtu in September.
Pakistan and Bangladesh have been hit harder due to their reliance on Gulf supplies. Pakistan's LNG demand is forecast to drop to 3.7 million tonnes in 2027 from 6.6 million tonnes in 2025, while Bangladesh faced prolonged power outages and increased coal dependency. Governments across the region have responded with gas rationing, power cuts, tariff increases, and additional budget allocations, though these measures only defer underlying vulnerabilities.
Wood Mackenzie warns that the crisis highlights structural weaknesses in South Asian LNG markets. Countries with diversified supply sources and flexible pricing mechanisms fared better than those without. The consultancy emphasizes the need for affordable LNG to support global demand growth of 60% through 2040, with South and Southeast Asia playing a central role.