The war in the Middle East is sending shockwaves through energy markets. The easing of fundamentals in international natural gas markets in early 2026 was abruptly disrupted by the de facto closure of the Strait of Hormuz at the beginning of March, which has created unprecedented uncertainty.

The crisis has profoundly distorted short-term market fundamentals and is altering the medium-term outlook for natural gas. The loss, for the time being, of almost 20% of global LNG supply has caused strong price volatility, driving up natural gas prices in both Asia and Europe to their highest levels since the 2022/23 energy crisis and prompting an adjustment in natural gas demand. In the Middle East, attacks on the region’s oil and gas infrastructure lowered gas supply availability for domestic markets. Furthermore, damage to LNG liquefaction infrastructure reduced the outlook for global LNG supply over the medium term and is expected to delay the effect of the unfolding LNG wave – a central theme of the IEA’s latest medium-term outlook.

Global LNG trade grew by 12% year-on-year (or 29 bcm) through the October-February period, supported by a series of new liquefaction projects, notably in North America, and stronger output from selected legacy exporters. The Plaquemines LNG plant in Louisiana alone accounted for almost half of the incremental LNG supply through this period and played a key role in the easing of market fundamentals. Consequently, natural gas prices in Asia and Europe continued to soften October-February amid improving LNG supply availability. In Europe, TTF prices fell by 24% in the first two months of 2026 year-on-year, while in Asia, Platts JKM prices declined by 27% compared with their levels last year.

Colder weather conditions together with lower natural gas prices supported stronger gas demand across Asian markets, with preliminary data suggesting that consumption increased by 2% y-o-y during the October-February period. In contrast, natural gas consumption fell by nearly 1% in Europe, with increased electricity generation from renewables weighing on gas burn in the power sector. Despite lower natural gas demand, Europe’s LNG imports rose to an all-time high over the 2025/26 winter, solidifying LNG’s position as a structural source of baseload supply in the region amid lower piped gas imports and declining domestic output.  

The 2025/26 heating season witnessed several cold spells, which resulted in near-record-breaking demand spikes across key markets in the northern hemisphere. This includes Winter Storm Fern in the United States, Storm Goretti in Europe and the East Asia cold wave in China. These events highlight the critical importance of gas supply flexibility for energy security, including in markets that are increasingly reliant on weather-sensitive renewable power generation.

The Middle East crisis represents a major supply shock to global gas and LNG markets. Global LNG production fell by 8% (or 4 bcm) y-o-y in March. Loadings from Qatar and the United Arab Emirates dropped by 9.5 bcm compared with last year. This steep decline was partly offset by higher LNG output from new projects in North America and Africa. Importantly, global LNG deliveries fell less steeply than loadings, declining by just 2% (or 1 bcm) y-o-y in March, since the full impact of the disruption takes time to materialise due to shipping time. LNG deliveries fell by 10% y-o-y (or more than 3 bcm) in the first 20 days of April.

Suppliers are taking steps to boost LNG deliveries. In the United States, the Department of Energy authorised the Plaquemines LNG plant in mid-March to increase its exports by 13% (or 4.6 bcm/yr) to both free trade and non-free trade agreement countries. The Elba Island LNG plant was authorised in early April to increase its exports by 22% (or 0.8 bcm) to non-free trade agreement countries. In early April, Australia and Singapore issued a Joint Statement on Economic Resilience and Essential Supplies to support the flow of essential goods including LNG.

Asian and European spot prices soared in March to their highest monthly average since January 2023, reflecting the rapid tightening of supply fundamentals. In Europe, TTF month-ahead prices averaged USD 18/MBtu in March, while Platts JKM traded close to USD 21/MBtu. In addition, the market uncertainty created by the sudden loss of almost 20% of global LNG supply has led to strong short-term price variability. The volatility of TTF month-ahead prices rose to 160% in March, their highest monthly level of volatility since September 2023, while volatility on JKM soared close to 300%, its highest level since March 2022. The spread between JKM and TTF prices flipped from a European premium of USD 0.9/MBtu in January-February to an Asian premium averaging USD 2.8/MBtu in March. This encouraged the diversion of flexible LNG cargoes from Europe to Asian markets. Both TTF and JKM prices moderated in April compared with their March levels and fell to their lowest since the start of the conflict by mid-April, following the ceasefire agreement reached between Iran and the United States.

Natural gas demand fell in key LNG import markets in March, driven by a combination of weather-related factors, higher prices and demand-side policy measures. A number of Asian countries are undertaking demand-side and fuel-switching measures to reduce the use of natural gas. The duration of the effective closure of the Strait of Hormuz is a key uncertainty that will affect global gas demand in 2026. Each month without LNG cargoes transiting the strait results in around 10 bcm of LNG supply loss, leading to a downward revision of demand prospects in key importing regions. Preliminary data suggests that Europe’s natural gas consumption fell by around 4% (or 2 bcm) y-o-y in March. This was primarily driven by lower gas use in the power sector amid a strong increase in wind and hydro power generation.

The LNG supply losses from Qatar and the United Arab Emirates are expected to total around 20 bcm for the March-April period. Furthermore, the restart and ramp-up of LNG liquefaction plants could take several weeks, resulting in output being around 10 bcm lower than under regular operations. 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. The damage caused by attacks on Qatar’s LNG facilities could reduce the country’s LNG output by nearly 70 bcm by 2030, assuming a repair period of four years. In addition, delaying the North Field East expansion project could reduce LNG supply by close to 20 bcm over the 2026-2030 period.

The Middle East conflict has already caused the loss of around 120 bcm of cumulative LNG supply for the period 2026-2030 when considering the combined effect of the near-term supply disruptions and the medium-term implications for supply. The losses resulting from the Middle East conflict account for around 15% of the expected global LNG supply over the 2026-30 period and, as such, will ultimately be offset by the start-up of new liquefaction facilities through the medium term. The impact on growth is largely concentrated through 2026-27 and, as such, delays the market easing effects of the LNG wave by at least two years.

The effective closure of the Strait of Hormuz profoundly disrupted global gas and LNG markets. The impacts of the supply losses are partly mitigated by the strong increase in non-Qatari LNG supply, including the start-up of new LNG liquefaction plants for which investment decisions were taken several years ago.

The current crisis highlights 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 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.

Strengthening the architecture of global gas supply security requires closer international cooperation between producers and consumers. The International Energy Agency (IEA) supports this dialogue through its Gas Working Party and the LNG Producer-Consumer Conference organised jointly with Japan’s Ministry of Economy, Trade and Industry.