The Middle East crisis has dealt a major supply shock to global natural gas markets. The gradual easing in market balances that had been underway since the second half of 2025 was significantly disrupted by the de facto closure of the Strait of Hormuz following the outbreak of the war in the Middle East at the end of February 2026. The disruption of liquefied natural gas (LNG) flows through the Strait – which had accounted for almost 20% of global LNG supply – resulted in strong price volatility.

The interim agreement reached between the United States and Iran in mid-June aims to provide a framework for a full reopening of the Strait of Hormuz and to lay the foundations for a lasting peace. At the same time, significant uncertainties remain over the resumption of normal trade flows.

The transit of LNG carriers has been on the rise since the announcement of the agreement, yet volumes are only at a fraction of pre-conflict levels. This report’s forecast assumes that the Strait fully reopens in the third quarter of 2026 and that operations at undamaged facilities in the region are fully restored by early in the fourth quarter, with LNG deliveries from Qatar and the United Arab Emirates ramping up progressively between July and October.

Gas supply from Middle Eastern producers has plunged in 2026, but other suppliers have stepped up. Between March and June, LNG loadings from Qatar and the United Arab Emirates declined by 35 billion cubic metres (bcm) year-on-year. However, this steep decline was partly offset by higher LNG output from new projects in North America and Africa and the improved availability of feedgas supply from legacy producers in Africa, Asia and the Russian Federation (hereafter “Russia”). Non-Gulf LNG production grew by almost 18% (or around 27 bcm) year-on-year during this period, offsetting around three-quarters of the decline in Gulf LNG deliveries during this period. Altogether, global LNG production fell by 4% (or 8 bcm year-on-year) from March to June.

To help fill gaps, exporters have adopted measures aimed at boosting LNG supply. In March, the US government authorized the Plaquemines LNG plant to increase its exports by 13% (or 4.6 bcm/year) to both free trade and non-free trade agreement countries. The Elba Island LNG plant was authorized in early April to increase its exports by 22% (or 0.8 bcm) to non-free trade agreement countries. Australia and Singapore also issued a Joint Statement on Economic Resilience and Essential Supplies in early April to support the flow of essential goods, including LNG.

Spot prices in Asia and Europe reacted swiftly to the supply disruption caused by the effective closure of the Strait of Hormuz. In March, they reached their highest monthly averages since January 2023 (during the 2022-2023 gas supply crisis). While prices softened in the second quarter of 2026, they remained well above 2025 levels. European price benchmark TTF and Asia’s Platts JKM both recorded their highest second-quarter averages since 2022, with TTF rising by 32% year-over-year to an average of near USD 16 per million British thermal units (MBtu) and spot LNG prices in Asia increasing by 45% year-on-year to an average of USD 17.5/MBtu. The spread between JKM and TTF prices flipped from a premium in Europe of USD 0.9/MBtu in January and February to a premium in Asia averaging USD 2.1/MBtu from March to June, which encouraged the diversion of flexible LNG cargoes from Europe to Asian markets.

The announcement of the interim agreement in June and the prospect of a full reopening of the Strait of Hormuz put downward pressure on prices in these regions, with TTF month-ahead and Platts JKM declining by 6% and 12%, respectively, between 15 and 26 June.

As consumption fell in key LNG import markets amid high spot prices, global gas demand declined in the first six months of 2026. In the Middle East, the disruption caused to the region’s gas-intensive industries is weighing on local natural gas consumption.

Preliminary data suggest this contraction was partly driven by a decline in natural gas demand in Asia, which is estimated to have fallen by 0.5% (or almost 5 bcm) compared with the same period in 2025. Since the beginning of March, the disruption of LNG flows via the Strait of Hormuz prompted the adoption of demand-side measures and fuel-switching policies across Asian markets which, together with higher prices, weighed on the region’s gas consumption. The People’s Republic of China [hereafter China]’s natural gas demand fell by an estimated 4% year-over-year in the March-June period. Together with stronger domestic gas production in China, this drove down Chinese LNG imports by 12% (or 3 bcm) compared with the same period in 2025 and helped to balance the global gas market. In OECD Europe, natural gas consumption fell by around 0.5% (or less than 1 bcm) in the first half of 2026. This decline was largely driven by lower gas use in the power sector amid stronger output from renewable sources.

The Middle East conflict has profoundly disrupted global fertiliser supply chains. The impact is twofold. First, exports of fertiliser from the Gulf have largely been halted since the start of the conflict. Second, the sharp increase in natural gas prices is weighing on the production rates in Asia and Europe of nitrogen-based fertilisers such as ammonia and urea for which natural gas is a feedstock. Similarly, reduced LNG availability has led to lower fertiliser production rates in certain Asian markets that typically rely on imports from the Middle East, including Bangladesh, India and Pakistan. A prolonged increase in fertiliser prices could further exacerbate pressure on agricultural systems and hurt the security of food supply in the world’s most vulnerable regions, including in Africa.

Despite the sharp loss of LNG exports from the Gulf, strong supply from other producing regions is expected to keep global LNG supply largely unchanged for the full year. Based on the assumptions of the forecast, annual LNG supply from Qatar and the United Arab Emirates combined is set to fall by about 45% year-on-year (or 54 bcm) from 2025. However, as was the case between March and June, these losses are expected to be broadly offset by a very strong increase of LNG output from non-Gulf producers. New projects in North America, Africa and Australia are expected to add close to 50 bcm of supply to the global balance in 2026. In addition, legacy projects are expected to contribute more than 10 bcm of extra supply amid improving feedgas availability. As a result, LNG trade globally is expected to remain broadly flat year-on-year in 2026, although any delays in the recovery of Gulf exports risk tipping the global market into its first annual decline in supply since 2012.

Global gas demand is expected to fall by around 0.5% (or 20 bcm) in 2026, the third annual decline this decade following previous decreases in 2020 and 2022. The impact of the conflict varies across regions. In the Middle East, where local gas production and processing facilities have been damaged and the output of gas-intensive industries such as fertiliser production has decreased, gas demand is projected to contract by around 4% in 2026 – the region’s first annual decline in consumption since 1993.

In Asia, natural gas demand is forecast to decline by 0.5% in 2026 as higher LNG prices spur gas-to-coal switching in the power sector and lead to lower operating rates across gas- and energy-intensive industries. In Europe, a combination of strong growth in power output from renewables and higher natural gas prices is expected to reduce gas demand by more than 2% in 2026.

The conflict is set to have a limited impact on gas demand in regions with no or limited reliance on LNG imports. In Africa, gas demand is projected to remain broadly flat, while in Central and South America, it is set to rise by 3% as lower hydropower output results in stronger gas use in the power sector. Gas demand in North America is forecast to marginally decline after relatively mild weather in the first quarter reduced gas use in buildings. In contrast, natural gas demand in Eurasia is expected to expand by nearly 3% in 2026 following colder winter temperatures in the first quarter.

The easing effects of the unfolding wave of global LNG supply on markets are set to be delayed. Cumulative LNG supply losses between 2026 and 2030 are estimated at 140 bcm when considering the combined effect of near-term supply disruptions and the medium-term implications of damage to gas infrastructure – including the Ras Laffan site in Qatar, which is the world’s largest liquefaction facility. The losses resulting from the Middle East conflict are equivalent to 15% of the amount of new LNG supply that is set to be added globally over the 2026-2030 period. The impact on supply growth is set to be largely concentrated in 2026 and 2027, which means markets could remain tighter than had been previously expected over the next two years.

Recently approved LNG projects will add to global supplies later this decade. Since the beginning of March, three major planned LNG liquefaction projects – all located in the United States – reached a final investment decision. The decision on the CP2 Phase 2 liquefaction project is set to increase the overall peak production capacity of the CP2 project to 40 bcm per year when commercial operations begin in the second half of 2030. Delfin LNG’s first floating LNG vessel (6 bcm per year) is set to start production in 2030, as is the Commonwealth LNG project (13 bcm per year). These new LNG export projects can contribute to enhancing gas supply security and affordability.

Strengthening the architecture of global gas supply security requires closer international cooperation, including between producers and consumers. The International Energy Agency 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.