Middle East War Sends Shockwaves Through Global LNG Market

The ongoing Middle East war has caused significant disruption to liquefied natural gas (LNG) exports from the Persian Gulf, leading to a doubling of LNG prices since January. This is largely due to Qatar's exports being constrained by the Hormuz crisis.

As a result, countries such as Japan and Pakistan are increasing their use of coal instead of expensive LNG, with demand for LNG globally potentially dipping by 8% this year from 2025 if the flow of gas out of the Persian Gulf remains subdued.

While some believe that the war could reshape the long-term outlook for LNG, others argue that new LNG capacity coming online in the US and Australia should lead to lower prices. However, with Qatari supply still strangled by the closure of Hormuz, the war premium is likely to remain sizable regardless.

Pakistan, despite its limited financial resources, has paid a premium to secure much-needed gas cargos during peak demand season, while China's imports have started rebounding after sharply reducing purchases in the second quarter. The European Union, on the other hand, is badly behind on its gas storage refill due to LNG prices.