The global gas market has flipped from double-digit growth to a sharp drop in just a month, losing about a fifth of global supply, as the conflict between the US and Iran ripples through energy markets, the International Energy Agency has said.
Production of liquefied natural gas, a key commodity for energy security, fell by 8 per cent, or four billion cubic metres, year-on-year in March, causing worldwide supplies to drop by 20 per cent, the Paris-based agency said in a quarterly report released on Friday.
That was sharply down from a peak growth of nearly 17 per cent in January, as demand fell in key LNG import markets, exacerbated by factors including weather, higher prices and demand-side policy measures, the agency said.
Several Asian countries, most of which are highly reliant on Middle East energy supplies, are undertaking demand-side and fuel-switching measures to reduce the use of natural gas, said the IEA, which has 32 member nations and 13 association countries.
The IEA said each month that goes by without LNG shipments passing through the Strait of Hormuz results in about 10 bcm of LNG supply loss, "leading to a downward revision of demand prospects in key importing regions", analysts at the agency said.
The strait, a key chokepoint through which about a fifth of energy exports normally pass, has been a flashpoint in the US-Iran conflict, which is entering its ninth week.
"The duration of the effective closure of the Strait of Hormuz is a key uncertainty that will affect global gas demand in 2026," the IEA said.
Qatar and UAE loadings
LNG loadings from Qatar and the UAE, two key players in the global market, slid by 9.5 bcm annually, the report said. Iranian strikes on QatarEnergy forced the company to declare force majeure barely a week after hostilities started.
LNG supply losses from the two Gulf states are expected to total about 20 bcm from March to April, according to the IEA. QatarEnergy produces about 18.5 billion cubic feet per day of gas from North Dome, enabling the country to supply about a fifth of the world's LNG.
"In addition to the disruption of LNG flows via the Strait of Hormuz, the damage caused to Qatar’s LNG liquefaction infrastructure has reduced the outlook for global LNG supply growth over the medium term and is expected to delay the effect of the unfolding LNG wave by at least two years," it added. "The Middle East conflict has profoundly disrupted Qatar’s natural gas industry."
Long-term impact
Longer-term, the conflict has already caused the loss of about 120 bcm of cumulative LNG supply for the 2026-2030 period, considering the combined effect of near-term supply disruptions and medium-term implications for supplies, the energy agency said.
"The losses resulting from the Middle East conflict account for around 15 per cent of the expected global LNG supply over the 2026-2030 period and, as such, will ultimately be offset by the start-up of new liquefaction facilities through the medium term," the report said.
"The impact on growth is largely concentrated through 2026-2027 and, as such, delays the market easing effects of the LNG wave by at least two years."
Among other regional countries affected by the conflict, Iraq has been hit the most from the LNG crunch. Pipeline gas imports from Iran to Iraq – a country already facing a growing gas supply gap since 2017 – were halted temporarily following strikes on Iran’s South Pars field, "creating knock-on effects on an already fragile gas and electricity supply situation", the IEA said.
Saudi Arabia, Bahrain and Kuwait have faced attacks from Iran, although the effects on their gas industries have been less pronounced, the agency added.
The effective closure of the strait profoundly disrupted global gas and LNG markets. The supply losses are partly mitigated by the strong increase in non-Qatari LNG supplies, including the launch of new LNG liquefaction plants for which investment decisions were taken several years ago.
The crisis has also highlighted the need for "continued adequate" investments across the gas and LNG value chains and other sources of energy, including electricity, to strengthen supply security and support balanced growth, the IEA said.
"The heightened price volatility also highlights the advantages that a diversified portfolio of long-term contracts can bring, mitigating short-term price variability both for buyers and sellers through sophisticated pricing formulae," the agency said. "Strengthening the architecture of global gas supply security requires closer international co-operation between producers and consumers."
The IEA warned this month that it would take about two months to re-establish steady oil exports through the strait, even after the waterway reopens.
