The Middle East conflict and the closure of the Strait of Hormuz have severely disrupted liquefied natural gas (LNG) supplies to South Asia, exposing critical vulnerabilities in the region's energy markets. Bangladesh and Pakistan, which relied heavily on Qatari LNG, importing over 70% and 99% of their supplies from Qatar respectively in 2025, faced significant shortages. Emergency measures, including gas rationing and fuel switching, have been implemented, but fiscal pressures are mounting due to expensive spot market purchases.
Wood Mackenzie's analysis reveals that South Asia's LNG demand, initially projected to grow by 2.7 million tonnes (Mt) in 2026, is now expected to decline by around 6 Mt. The region's heavy dependence on Qatari and UAE LNG, with nearly 90% of shipments passing through the Strait of Hormuz, has led to a sharp increase in spot prices compared to contracted rates. This has triggered fiscal crises and reduced gas demand by over 3 Mt in Bangladesh and approximately 1.5 Mt in both India and Pakistan.
Pakistan has been the hardest hit, with 99% of its 2025 LNG imports sourced from Qatar. The closure of the Strait reduced Pakistan-bound LNG by up to 0.4 Mt per month from March to November 2026, leading to over 2.5 Mt of gas demand destruction. Bangladesh, unable to diversify its supply sources, was forced into the spot market, procuring cargoes at US$23-28/mmbtu in March 2026. India managed relatively better by implementing a tiered demand-management strategy, but spot prices still rose significantly.
Governments across the region have implemented emergency measures, but Wood Mackenzie warns that these actions only postpone costs rather than resolve them. The duration of the conflict remains the key uncertainty, with governments facing a choice between energy security and fiscal stability. Wood Mackenzie emphasizes the need for diversification, flexible pricing, and infrastructure resilience to avoid future vulnerabilities in an increasingly interconnected market.