Disruption of Liquefied Natural Gas Supply in Asia Amid Iran Conflict

Countries across Asia are facing a significant disruption in liquefied natural gas (L.N.G.) supplies due to the ongoing conflict involving Iran. The blockade of the Strait of Hormuz and attacks on Qatar's Ras Laffan gas facility have resulted in the loss of approximately 28 million tons of L.N.G. from the market this year, severely impacting energy availability for major Asian economies such as China, Japan, India, and South Korea. This disruption threatens to persist until at least 2028, when new U.S. gas production is expected to alleviate some supply constraints.

New York Times

As the last shipments of L.N.G. from the Persian Gulf arrive, Asian countries are bracing for a gap between supply and demand. With 90% of the region's L.N.G. sourced from the Middle East, countries are already switching to oil and coal for electricity generation, which may lead to increased consumption of these fuels. Energy experts predict that the physical impact of this supply disruption will become evident in the coming days, with industrial output at risk.

New York Times

In response to the dwindling global L.N.G. supplies, a joint venture between QatarEnergy and Exxon Mobil Corp. has commenced production at the Golden Pass LNG facility in Texas. This facility is expected to deliver its first cargo in the second quarter of 2026, potentially providing a critical alternative source of supply as global markets tighten. The U.S. is already the world's largest L.N.G. exporter, producing over 116 million metric tons annually, and this new project may further enhance its role in global energy security.

BloombergMiddle East oil shock puts new premium on Canadian energyNew York Times

While L.N.G. prices in Asia have surged by approximately 90% since the onset of the conflict, U.S. natural gas prices have remained stable, primarily due to the country's vast domestic supply. The Henry Hub price has held steady around $3 per million British thermal units, contrasting sharply with the volatility seen in international markets. This stability has insulated U.S. consumers from the broader energy price shocks affecting Europe and Asia.

E&E News

Critics argue that the ongoing conflict and resultant supply disruptions could lead to long-term changes in energy consumption patterns. Some countries may pivot away from L.N.G. towards coal or renewable energy sources, particularly as the cost of importing gas rises. Additionally, the potential for further escalation in the conflict raises concerns about the reliability of energy supplies from the Middle East, which could permanently alter global energy markets.

New York Times

The current crisis has highlighted the importance of diversifying energy sources and securing long-term contracts for L.N.G. as countries seek to mitigate risks associated with geopolitical instability. Analysts suggest that the war could spur increased interest in Canadian energy exports, as nations look for reliable alternatives to Middle Eastern supplies. However, the long-term implications of this conflict on global energy demand and supply remain uncertain, with potential shifts in market dynamics expected in the coming years.

Middle East oil shock puts new premium on Canadian energy

• “It’s a significant tightening of the market — we’re talking reduced production until the end of the decade,” — Henning Gloystein, Managing Director for Energy, Eurasia Group

New York Times

• “Golden Pass LNG will strengthen US energy production and reinforce the nation’s role as a reliable supplier to global markets, enhancing energy security and helping meet worldwide demand,” — Exxon Mobil Corp. Statement

Bloomberg

• “The Middle East has lost credibility as a stable supply of energy,” — Adam Pankratz, Business Economics Lecturer, UBC

Middle East oil shock puts new premium on Canadian energy

There are discrepancies regarding the extent of the supply disruption, with some sources indicating that the loss of L.N.G. from Qatar could take three to five years to recover, while others suggest that U.S. production increases may alleviate some pressures sooner. Additionally, the impact of rising prices on consumer behavior and energy policy in various countries remains to be fully assessed.

New York Times