The market outlook for gas and LNG in Asia

Natural gas and LNG have assumed a pivotal role in the global energy mix, making them crucial tools in addressing supply-demand imbalances and geopolitical complexities. The Middle East’s fluid landscape — as demonstrated by the conflict involving Israel, the United States and Iran which began in February and the resultant bottleneck in the Strait of Hormuz — has redrawn global energy maps in real time and further highlighted the geopolitical sensitivity of gas and LNG markets. For Asia’s high-growth economies and the energy industry, these disruptions are no longer a regional concern — they are a direct assault on the pillars of energy security and economic stability.

Vulnerability exposed

The conflict again highlighted the vital importance and vulnerability of the Strait of Hormuz. It accounts for about 20% of global LNG transit, so a collapse in trade through the route has widespread ramifications.

The world’s LNG market was nearing a turning point after the disruption from Russia’s war with Ukraine. Prior to the Iran conflict, Qatar shipped 110 bcm of LNG annually to Asia, Europe, and increasingly Africa. But this relied on robust transit routes. About 20% of the world’s LNG is supplied by Qatar, but attacks on the Ras Laffan refinery have affected about 17% of the country’s export capacity. Repairs could take several years in a worst-case scenario, slashing revenue by about $20 billion a year. Production disruptions will lead to higher costs or shortages for countries reliant on Qatari LNG, especially in price-sensitive Asian and European markets. Asian LNG prices more than doubled to three-year highs, including a surge in the Japan-Korea Marker (Platts JKM) reported by Bloomberg in early March.

As hostilities began, European natural gas prices soared above 60% on the benchmark Dutch TTF (Fastmarkets); from €30 per MWh to hit a high of €74 per MWh, reflecting panic over tightening LNG supplies.

It was feared an escalation of the conflict could increase the likelihood of commercial disputes among LNG market participants in the ensuing months. And sustained high gas prices might yet prove inflationary globally, reduce worldwide GDP growth, and push major economies into a global recession. 

The fragility of peace: the ceasefire and the LNG crisis

When a ceasefire came into place on the ground in the Middle East, energy markets reacted with predictable volatility, seeing oil and gas prices plunge by as much as 16%. However, the headline figures mask a far more stubborn reality. While a continued cessation of hostilities was a welcome development, as a structural fix for the global natural gas and LNG market, the initial 14-day window was simply a tactical pause in a much larger strategic crisis.

Estimates suggested that approximately 15 LNG-laden tankers could transit the Strait of Hormuz over that fortnight. This represents roughly 1 million tonnes (Mt) of LNG — a volume that, while significant in isolation, is a mere fraction of the 7-8 Mt typically exported by Qatar in a standard month. Maritime trackers reported just five LNG carriers transited the Strait between 22 April and 7 May.

The fundamental issue is one of industrial inertia. Qatar’s massive Ras Laffan production complex is not a tap that can be turned on at a moment’s notice.

For Asia — the centre of global gas demand growth and LNG infrastructure investment — the implications are especially acute. A full operational restart requires multiple weeks of technical lead time. Furthermore, the spectre of permanent infrastructure damage remains; even in a best-case scenario, QatarEnergy may be looking at a 17% capacity reduction, with only 12 of its 14 liquefaction trains currently viable. For an industry built on the principle of reliable, high-volume energy addition, this level of impairment is a significant blow to global energy security.

Market floors and the Hormuz premium

Beyond the physical production, the economics of transit through the Strait of Hormuz have fundamentally shifted. Even the possibility of additional transit costs through the Strait of Hormuz has injected a new geopolitical risk premium into LNG pricing, with estimates of tolls as high as $2 million per passage adding roughly $0.50/MMBtu to cargo costs, creating a new friction-heavy environment. When compared to the standard $1.50/MMBtu cost for a 28-day journey to Europe, this geopolitical security premium is a substantial addition for the industry if it plays out.

While ICIS TTF gas prices retreated towards the pre-war €30–32/MWh range (the 52-week low was €26.53) before settling around €46/MWh in mid-May, any geopolitical tax on Hormuz transit will lead to cheap gas becoming a thing of the past. This pullback reflects short-term positioning rather than a resolution of underlying supply risks.

A 150 TWh reduction in gas-to-power demand for the remainder of 2026 was previously estimated due to high prices; should prices stabilise at lower levels, a strong power sector reaction in Europe could quickly absorb the surplus.

Against that context, the industry is looking forward with a sense of energy realism. The initial two-week peace deal, for instance, was too brief to resume critical work on the North Field East (NFE) expansion. 

The Asian gas equation

Before the conflict, Gulf producers collectively supplied almost a fifth of global LNG. Long-term constraints risk major shocks to Asian customers, as several countries are heavily dependent on those imports. As supply rapidly leapt from surplus to shortage, Asia’s stock markets have repeatedly fallen.

The EIA said 83% of LNG shipped through the Strait in 2024 went to Asian markets: China, India, Japan, and South Korea, accounting for 59%. “This conflict highlights that oil and gas supply chains are inherently unreliable and vulnerable to geopolitical instability,” said Zero Carbon Analytics. “Of all commodities, LNG is the most exposed to geopolitical shocks, with conflicts magnifying inherent volatility.”

Before the current escalation, regional assumptions about long-term gas demand were built on an expectation of ample and reliably traded LNG supply. All of this challenges Asia Natural Gas & Energy Association’s prediction that Asia Pacific natural gas use would more than double by 2050. LNG consumption in the region increased by 35% between 2015 and 2023 (Ember Energy).

Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, cites a 6.5 million-tonne-per-month loss in Gulf export volumes. “The maths is simple,” he said. “No Gulf exports beyond four or five months will mean annual LNG supply falls, upward pressure on prices through 2026 and demand destruction, particularly in Asia.”

Anne-Sophie Corbeau, Global Research Scholar at the Center on Global Energy Policy (CGEP) at Columbia University, says a price drop was expected possibly this year, based on additional LNG due in 2026 and 2027. “Now everything is up in the air,” she said. “Growth in energy supply in 2026 is going to be much lower than everybody expects. If the crisis extends, there might be a point at which there is no growth at all.” 

Short-term constraints and market responses

Conflict has again sharpened attention on the geopolitical and energy security implications of LNG production and transit. Asian buyers have been scrambling to manage the shortage. Consultancies such as S&P Global Energy have cut global supply forecasts by up to 35 million tonnes — roughly 500 cargoes.

One response has seen European importers outbid, leading to supplies being redirected to Asia. This again reveals Europe›s vulnerability, which sought to diversify away from Russian gas but is now exposed to reliance on imported LNG, much of it from the Gulf.

Governments and companies confronting uncomfortable realities are potentially rethinking energy security doctrines to maintain economies and growth.

In some Asian states, particularly China and India, fossil fuels such as coal could prove critical for short-term energy security.

In the medium to longer term, buyers may need to reassess the balance between price and the security of LNG supply. For example, Australian LNG costs more but offers shorter, less volatile shipping passage to Southeast Asia. However, existing project production is mostly already contracted (Norton Rose Fulbright). Meanwhile, multiple Asian countries competing simultaneously for limited alternative cargoes push spot prices higher.

In a market now defined by absolute scarcity rather than elasticity, even modest volumes have an outsized influence on price formation. Flowers explains that 3.5b cubic feet per day could be added, mainly from the most LNG import-dependent producers. “This is only 0.8% of global supply, but more crucially, it is 30% of the LNG curtailed in Qatar,” he said. “The gain is not enough to prevent serious price consequences, but enough to potentially soften some of the blow.”

Diversifying supply and reducing exposure

Trends first accelerated by Russia's invasion of Ukraine are now being stress-tested by renewed instability in the Middle East. 

Disruption caused by Russia’s war with Ukraine prompted new LNG projects, mainly in the US. Wood Mackenzie says these could add 35 million tonnes to global supply this year (an 8% increase).

The US was the world's largest LNG exporter in 2023, according to the Reuters, and India's third-largest LNG supplier last year. 

Gas supply disruptions have prompted Pakistan's government to look to coal, hydropower, and nuclear power, while price volatility and shipping uncertainty are likely to sharply increase power costs in Bangladesh, raising subsidy requirements and increasing the likelihood of load shedding and reduced industrial supply.

Singapore commissioned an LNG terminal and is developing a second to expand regasification capacity and reduce exposure to supply disruptions. However, this heightens sensitivity to global LNG prices.

At least one report suggests Japan may now ramp up coal-fired power generation amid an LNG crunch.

Alternatives for South Asian and Southeast Asian LNG buyers include Papua New Guinea, Indonesia, Malaysia, and Brunei, offering regional proximity, existing infrastructure and trading history. Barriers include limited spare capacity, declining production in some legacy fields, and competition with domestic demand.

Canadian West Coast LNG offers direct access across the Pacific and a stable regulatory environment. However, near-term volumes are limited. 

• This Market Outlook report was produced for Gastech. For more information and to register as a delegate, visit Gastech Bangkok 2026.