Middle East Conflict Reshapes Global Gas Market Dynamics

Key Takeaways

• Global LNG supply shock. The Middle East conflict shut down Qatar’s Ras Laffan facility, the world’s biggest, and constrained the Strait of Hormuz, removing roughly 20% of global LNG supply and threatening the long-term operation of the site. European gas storage sits at about 30% of capacity, its lowest seasonal level since the winter before Russia’s invasion of Ukraine.
• Replacement options are limited. U.S. and Australian LNG terminals are running near full capacity, and European buyers are now competing with Asian importers willing to pay higher premiums given their outsized reliance on Qatari LNG. Conditions are more constrained than in 2022, when U.S. terminals still had spare capacity to ramp up.
• Markets pricing a short-lived disruption. Gas forward curves across Asia and Europe remain in steep backwardation, with near-term prices well above longer-dated contracts. Prolonged Strait of Hormuz constraints could shift the rally into summer and winter forwards, repricing the full curve.
• U.S. markets feel the spillover. Widening LNG export margins are pulling domestic gas toward exports. Combined with storage deficits from Winter Storm Fern and growing AI-driven power demand, U.S. forward gas and power prices face upward pressure heading into winter 2026/27.