The impacts of the Middle East conflict on oil markets have been in focus over the past week, with IEA Member countries launching the largest ever release of emergency oil stocks to counter the supply disruptions. At the same time, the Gulf’s output of LNG has also been significantly disrupted by the war.
The key issue is the flow of tankers through the Strait of Hormuz, the narrow sea passage that connects the Persian Gulf with global shipping routes. Last year, 110 billion m3 of LNG passed through the Strait, almost a fifth of the world’s total LNG supply. But the current conflict has slowed the flow of tankers through the Strait to a trickle.
What’s more, production at Ras Laffan in Qatar, the largest LNG facility in the world by some distance, was shut down following an attack on the facilities on 2 March.
All the LNG that typically passes through the Strait is produced by either Qatar or the United Arab Emirates – with the large majority of it heading to Asia. In 2025, almost 90% of all the LNG exported via the Strait of Hormuz was destined for Asian markets. Just over 10% went to Europe.
Now, the sudden loss of about a fifth of global LNG supply is putting major strains on gas markets around the world. Natural gas prices in Asian markets have risen sharply to attract more cargoes, reflecting the region's greater exposure to supply disruptions via the Strait. Higher prices and supply constraints have also prompted demand-side adjustments, including gas rationing in some countries.
In Asia, the benchmark LNG price more than doubled in the first two trading days following the start of the conflict, while the European natural gas benchmark shot up by around 70%. Prices have eased somewhat from those initial highs, but they remain volatile and well above their pre-conflict levels.
Before the outbreak of the conflict, global natural gas markets had been gradually rebalancing following the major shock from Russia’s invasion of Ukraine in February 2022. A wave of new LNG capacity between now and the end of this decade is expected to transform market dynamics by significantly expanding available supply. But gas markets remained tight in the first two months of this year, with storage levels depleted coming out of the heating season in the Northern Hemisphere.
For both global oil and gas supplies, the most important factor for a return to stable flows is the resumption of regular transit of shipping through the Strait of Hormuz.