The ongoing conflict involving Iran is creating significant turbulence in the global liquefied natural gas (LNG) market, with major supply disruptions and soaring prices raising questions about previously expected demand growth, particularly among price-sensitive Asian buyers.
Before the crisis, analysts projected that global LNG supply could rise by up to 10 per cent in 2026, reaching between 460 and 484 million tonnes, driven by new capacity from the United States and Qatar. Demand growth was expected to follow a similar trajectory.
However, the Iran conflict has upended these forecasts. Tehran’s blockade of the strategically vital Strait of Hormuz, which handles around 20 per cent of the world’s LNG flows, combined with damage to Qatar’s liquefaction infrastructure - sidelining 12.8 million tonnes per year for the next three to five years - has prompted consultancies including S&P Global Energy, ICIS, Kpler, and Rystad Energy to cut global supply expectations by as much as 35 million tonnes.
This shortfall is equivalent to about 500 LNG cargoes - enough to meet over half of Japan’s annual imports or supply Bangladesh for five years.
“We expect this gas price crisis will lead some countries to reconsider growing their gas demand at the rate we previously forecast,” said Lucien Mulberg, analyst at S&P Global Energy.
The consultancy expects Qatar and UAE exports to drop by 33 million tonnes this year, with further reductions projected through 2029 due to delays in the North Field expansion and ADNOC’s Ruwais LNG project.
The supply disruption has pushed LNG prices in Asia to $25.30 per million British thermal units (mmBtu), more than double the $10/mmBtu threshold where emerging-market demand typically rises.
Analysts expect high prices to persist through 2027, forcing South Asian countries to seek alternative fuels, including coal and domestic gas. Pakistan has introduced energy rationing measures, including a four-day work week, while India’s energy-intensive industries, such as fertilisers and ceramics, are cutting production.
Even as North Asian buyers like China, Japan and South Korea remain largely shielded due to diversified sourcing, including Russian pipeline imports, Arctic LNG projects, and domestic gas production, South and Southeast Asian economies face a pronounced risk of permanent LNG demand reduction.
Analysts warn that the crisis underscores the vulnerability of energy security in markets heavily reliant on Qatari LNG and may accelerate a shift toward alternative energy solutions.
