Hormuz crisis puts one-fifth of global LNG supply at risk

Escalating US-Iran tensions have halted LNG production in Qatar and threatened shipping through the Strait of Hormuz, exposing Europe, Asia and emerging importers to sharp price spikes and renewed energy security risks.

WHAT: Qatar has suspended LNG output at Ras Laffan after regional military strikes, while Iran has warned shipping against using the Strait of Hormuz, a chokepoint for around 20% of global LNG trade.

WHY: The disruption comes as gas markets are already tight in Europe following a cold northern winter and low storage levels. Asian markets meanwhile rely on Qatari supply heavily. 

WHAT NEXT: Markets will focus on whether Hormuz remains passable and how quickly Qatar can resume exports, with sustained disruption likely to force fuel switching in Asia and strain Europe’s summer restocking.

Escalating hostilities between the US, Israel and Iran have placed a significant share of global LNG supply at risk, after Qatar halted production at its main export hub and Tehran warned commercial shipping against transiting the Strait of Hormuz, a chokepoint critical to energy trade.

QatarEnergy said on March 2 it had suspended LNG output at Ras Laffan, following military strikes that targeted infrastructure linked to the complex. The facility handles nearly all of Qatar’s LNG production, with a capacity of about 80mn tonnes per year, making it the single largest LNG export hub in the world. Any prolonged outage would remove close to 20% of global LNG supply from the market.

The move came after Qatar’s defence ministry confirmed that a drone launched from Iranian territory had struck a power facility servicing Ras Laffan, although the extent of the damage was not disclosed. Iran has since warned that vessels attempting to pass through Hormuz would be treated as hostile, a threat that has already disrupted maritime traffic.

Shipping data show multiple LNG carriers either anchored in international waters outside the strait or immobilised inside the Gulf, reflecting rising insurance costs, operational uncertainty and the risk of escalation. Lloyd’s List Intelligence reported that war-risk premiums for vessels transiting Hormuz have surged in recent days, while some charterers have reportedly instructed ships to delay entry until the security situation clarifies.

Qatar is uniquely exposed to any closure of Hormuz, as it lacks alternative export routes. By contrast, other major LNG exporters like the US, Australia and Russia can redirect cargoes via multiple corridors. The UAE, which exports around 6mn tpy of LNG from Das Island via Hormuz, is also affected, though on a far smaller scale.

Europe struck by renewed supply shock

European gas markets reacted sharply to the developments, compounding an already fragile supply-demand balance. The front-month Dutch TTF contract rose sharply in early trading on March 2, reaching €41 per MWh by 08:30, up from €32 per MWh at the previous session’s close, before easing slightly later in the morning. It closed at the end of the day at €42.9 per MWh, or up a third versus the previous end of trade.

The rally followed weeks of tightening fundamentals. Europe’s gas storage sites were around 30% full by mid-February, the lowest level for this point in the season since 2022, after an extended cold spell across central and eastern Europe drove withdrawals well above historical norms. In Germany, Europe’s largest gas market, storage levels had fallen to roughly 22%, according to Gas Infrastructure Europe (GIE) data.

The continent entered winter with a thinner buffer than last year. EU storage stood at 83% at the start of November, compared with 95% a year earlier, partly reflecting regulatory changes that lowered the mandatory fill target to 80%. While the easing helped reduce summer price spikes, it left less margin for error once winter demand accelerated.

Additional strain has come from Eastern Europe. Russian attacks on Ukrainian energy infrastructure have disrupted domestic gas production, forcing Kyiv to rely more heavily on imports. Poland agreed in January to increase gas transit capacity to Ukraine to 18.4mcm per day from 15.3mcm, starting in April, tightening regional balances further.

Despite the jump in prices, European gas remains well below crisis-era levels. Even after the latest surge, TTF is trading at less than a quarter of the nearly $2,000 per 1,000 cubic metres seen in August 2022. But banks and trading houses warn that a prolonged Hormuz disruption could quickly erase that comfort. Goldman Sachs has estimated that a month-long blockage could push European gas prices up by more than 100%, as buyers scramble to replace lost Middle Eastern volumes.

There may be other risks. Russian President Vladimir Putin claimed on February 24 that Ukraine was plotting attacks on the Blue Stream and TurkStream gas pipelines under the Black Sea to Turkey. TurkStream supplied 17.6bn cubic metres (bcm) per year to Europe last year, equivalent to around 5% of EU gas demand. While Putin’s claim is not possible to verify – there is a precedent. Ukrainian personnel are alleged to have carried out the attack on the Nord Stream pipeline in 2023, at least according to investigations by The Wall Street Journal, Der Spiegel and others. 

Attention is already turning to summer. Europe will need to import unusually large volumes of LNG to rebuild inventories ahead of next winter, yet forward curves show limited incentive to inject gas early, increasing the risk of price volatility if supply tightens. Prolonged disruptions via Hormuz would make this task all the more challenging. 

Asia faces the greatest exposure

Asia, which absorbs the bulk of Qatari LNG, would be hardest hit by a sustained closure of Hormuz. Qatar typically sends around 85% of its LNG exports to Asia, under long-term contracts with buyers in Japan, South Korea, China, India and Taiwan.

Vessel-tracking data compiled by Vortexa show that more than one-quarter of Asia’s LNG imports pass through Hormuz, with China receiving roughly 30% of its LNG via the strait. Qatar is China’s second-largest LNG supplier, after Australia.

The impact would vary sharply across the region. Wealthier buyers such as Japan and South Korea have greater contractual cover and fuel-switching flexibility, while price-sensitive markets including India, Pakistan and Bangladesh are more exposed. During previous LNG price spikes in 2021–22, several South Asian buyers deferred or cancelled spot cargoes, triggering power shortages and forcing utilities to fall back on coal, fuel oil and diesel.

China’s LNG demand rebound could also be curtailed if prices spike and supply tightens. Although Beijing has avoided direct US LNG imports since tariffs were imposed during renewed trade tensions, Chinese companies hold long-term US contracts totalling about 25mn tonnes per year, much of which has been resold into Europe. A shortfall in Qatari supply could prompt a redirection of some of those cargoes back to Asia, reducing availability for European buyers.

China may also step up cargoes from Russia’s Arctic LNG-2 project, which began exports last year despite US sanctions. Options to increase Russian pipeline gas are limited, however, with the 38bcm per year Power of Siberia pipeline already operating at full capacity.

Africa and emerging markets under strain

Elsewhere, the impact would be felt primarily through higher prices. South America is unlikely to face immediate shortages unless the disruption extends into the Southern Hemisphere winter, when Brazil, Argentina and Chile increase LNG imports, but higher spot prices would still raise generation costs.

Africa faces sharper risks. Egypt has been hit simultaneously by Middle East instability and a loss of pipeline gas from Israel. Israel shut the Leviathan field on March 2, and operator Chevron declared force majeure, cutting around 4.5bn cubic metres per year, or roughly 8% of Egypt’s gas consumption.

Egypt has already resumed LNG imports since 2024 to cover rising demand and declining domestic output. Any sustained spike in global LNG prices would significantly raise import costs and strain public finances. In previous years when Egypt was unable to keep up with soaring demand for gas, it suffered rolling blackouts.

In sub-Saharan Africa, Ghana and Senegal are particularly exposed. Both rely on spot LNG to stabilise power systems and lack the fiscal capacity to absorb sustained price increases. During earlier periods of high LNG prices, cargo cancellations, load-shedding and delays to gas-to-power projects were widely reported, reinforcing reliance on fuel oil and diesel. A Hormuz-driven price shock would likely produce similar outcomes.

The crisis highlights how vulnerable global gas markets remain to disruptions at a handful of strategic chokepoints. Even as countries diversify suppliers, the concentration of LNG export capacity in the Gulf means geopolitical shocks can still reverberate rapidly across prices, trade flows and energy security worldwide.