Caleb HamiltonLiquefied natural gas prices have doubled since January, with buyers who paid 10 dollars per million British thermal units at the start of the year now shelling out 20 to 22 dollars for cargoes delivered through much of July. The middle east war has choked exports from the Persian Gulf, and the squeeze on LNG may be doing more lasting damage to global energy markets than the more closely watched swings in crude, which trade proxies like USO reflect but cannot fully capture the strain building in gas.
Why the Gulf Squeeze Is Hitting Gas Harder Than Oil
Qatar hosts the world's largest single liquefaction hub, and a force majeure declaration tied to the conflict has slowed exports from the Persian Gulf to a trickle. Buyers desperate for cargoes during peak northern hemisphere demand season have shown they will pay almost any price to secure them. Pakistan, a country with thin financial reserves, still paid the premium rather than go without. That willingness to pay, multiplied across import dependent nations, is what has pushed spot LNG prices to levels not seen since energy markets last convulsed.
Attacks on LNG carriers moving through the Strait of Hormuz have made clear that a quick return to normal shipping through that chokepoint is unlikely. Reports of peace talks between the United States and Iran keep surfacing in the media, but nothing concrete has followed. Until that changes, consultancy Gas Strategies expects global LNG demand could fall as much as 8% this year compared with 2025 if Gulf flows stay depressed.
How the Middle East War Is Reshaping Where Countries Get Their Energy
Coal has made an unwelcome comeback. Japan, the second largest LNG importer in the world, has leaned harder on coal fired power plants, and it is not alone; much of Asia has done the same rather than pay LNG's war premium. Europe, meanwhile, has fallen behind on refilling its gas storage ahead of winter, a direct result of prices too high to justify aggressive buying. It is a textbook case of demand destruction, where the fuel is available but the price simply pushes buyers elsewhere.
Not every country is equally exposed. China cut LNG purchases sharply in the second quarter but has been rebuilding them this quarter as summer heat drives electricity demand and domestic gas output slips. Data from Kpler shows China stepping up its buying at the end of June. Part of China's advantage is optionality: it can draw on both LNG cargoes and pipeline gas from Russia, a cushion most of Europe lacks.
The European Union is actually importing Russian LNG at record volumes right now, an awkward fact given its own ban on Russian gas imports set to take effect at the start of 2027. Once that ban kicks in, the gas Russia currently sends to Europe could get redirected elsewhere, potentially easing supply for buyers like China and giving a boost to exporters such as the United States and Australia, which is already the world's top LNG exporter and is adding new liquefaction capacity. In theory that extra supply should cool prices, but with Qatari volumes still bottled up by Hormuz disruptions, the war premium looks likely to persist regardless of how much new capacity comes online elsewhere.
Long Term Demand Outlook Beyond the War Premium
Shell's forecast from late June projects LNG demand climbing to nearly 700 million tons a year by 2050, a 65% jump from 2025 levels, as it argued countries will keep prioritizing the flexible, reliable energy security that gas offers. Pat Breen of Gas Strategies expects the current tightness to ease by next year, which should push producers to revisit expansion plans. By 2030, roughly 207 million tons of new annual LNG capacity is expected to come online, though whether buyers will be there to absorb it all remains an open question.
History suggests demand tends to show up once prices fall, the same pattern seen repeatedly in oil markets. Gas has one advantage renewables still lack: it can generate electricity on demand and be stored far longer than the few hours solar and wind batteries typically allow. That practical edge is likely to keep gas central to power grids even as wind and solar capacity expands.
Frequently Asked Questions
How middle east war?
The conflict has disrupted shipping and export operations tied to the Persian Gulf, including a force majeure at Qatar's major liquefaction hub and repeated attacks on LNG carriers transiting the Strait of Hormuz.
Why middle east war?
The broader conflict stems from regional tensions involving Iran and its neighbors, with energy infrastructure and shipping lanes becoming targets or casualties of the fighting.
What middle east war?
It refers to the ongoing regional conflict that has disrupted oil and LNG exports from the Persian Gulf, driving up global gas prices and forcing importers to seek alternative supplies.
When middle east war?
The disruptions to LNG and oil flows referenced here have intensified through the first half of 2025, with prices roughly doubling between January and July.
Is middle east war over?
No. Attacks on vessels in the Strait of Hormuz continue, and reported peace talks between the United States and Iran have not produced a confirmed resolution.
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