Asian and European energy buyers are intensely competing for increasingly scarce liquefied natural gas (LNG) cargoes following disruptions to shipments through the Strait of Hormuz due to conflict in the Middle East. This conflict has caused a significant loss of supply, with an estimated 36 million metric tons of LNG supply lost this year due to the war in Iran preventing shipments from Qatar and the United Arab Emirates.
This disruption has rapidly tightened global gas markets, moving from a period of oversupply last year to a projected global shortage this year. LNG carriers originating from US Gulf export terminals, initially bound for Europe, have been observed changing course towards Asian destinations, highlighting the fierce competition. Taiwan, South Korea, and Japan are particularly impacted, as they relied heavily on Gulf producers for their gas in 2025, with Taiwan sourcing over 30% from Qatar alone.
Gas benchmarks in both Europe and Asia have surged. European benchmark prices reached €69.50 per megawatt-hour, more than double pre-conflict levels, while Asia's JKM benchmark price for LNG more than doubled to $24.80 per 1 million British thermal units. This comes as Europe enters winter with historically low storage levels, estimated to be around 75% by November 1, and 10% lower than last year at this time. Analysts from Woodmac predict spot LNG prices could spike to $40/MMBtu.
The closure of the Strait of Hormuz impacts an estimated 81 million tonnes (110 billion cubic meters) of LNG, representing about a fifth of global supply. Although a prolonged closure could see prices continue to rise, analysts do not expect them to reach the record €347/MWh peak seen during the 2022 energy crisis. Shipping costs have also risen sharply, complicating trade decisions, and buyers are beginning to include stricter clauses in contracts to penalize suppliers who divert cargoes for commercial gain.
