Hormuz Tensions Add $39 Billion to Global LNG Bill

Escalating conflicts in the Middle East disrupting energy shipments through the Strait of Hormuz are reshaping supply routes in the global liquefied natural gas market. According to data from energy research firm Rystad Energy, the contracted and spot procurement bill for global LNG importers will increase by at least $39 billion in 2026.

Rystad Energy's modeling is based on a scenario where LNG deliveries originating from Qatar and the United Arab Emirates are disrupted from March 2026 through the end of the year. In this scenario, although global buyers procure 60.7 million tons less gas, total portfolio costs rise by 18% from the pre-war forecast of $217.8 billion to at least $256.3 billion.

How were Europe and East Asia affected by the crisis?

Europe emerged as the region facing the largest cost increase from the crisis. Although gas demand across the continent is expected to decline by 24 million tons, the total LNG bill is calculated to rise by at least $12 billion. Of Europe's planned 24.7 million tons of Qatari LNG volume for 2026, the continent is projected to be deprived of 20.6 million tons. With the continent meeting approximately 65% of its imports from the spot market, average gas prices jumped 47%, while the scope to further increase the spot share has also narrowed.

In contrast, East Asia felt more limited cost pressure thanks to its long-term contract structure. With the spot share in its imports at only 14.5%, the fact that 82% of long-term LNG contracts in East Asia are oil-indexed shielded the region; as oil prices rose less compared to spot gas, East Asia's cost increase remained at 9.7%. In South Asia, Pakistan and India adapted by cutting purchases, while in Africa and South America, Egypt and Brazil were the countries that increased import demand.

How did the Hormuz disruption alter global LNG balances?

Rystad Energy Senior Analyst for Gas and LNG Research Christoph Halser stated that diversifying price indices helps manage costs but does not guarantee physical supply. The analysis emphasized that US Gulf Coast shipments bypassing the Strait of Hormuz, along with Australian and Canadian Pacific routes, offer alternative paths, but buyers need to carefully examine the long-term cost advantage of Henry Hub-indexed contracts.

This content is for information purposes only and does not constitute investment advice.