The Iran War’s Impact on Gas Markets May Be Felt for Years

Trump later said his Middle East envoy Steve Witkoff and son-in-law Jared Kushner had talks with a senior Iranian official, though he declined to identify the individual. However, Iranian regime-affiliated news outlets cited the Ministry of Foreign Affairs denying any contacts, direct or indirect, with the United States. Mohammad Bagher Ghalibaf, the speaker of the Iranian parliament and the purported interlocutor of U.S. talks, also denied negotiating with Washington and said Trump’s message was aimed at manipulating markets.

And it worked, on markets at least: Oil prices fell, and U.S. stock markets rose. 

Regardless of whether the United States and Iran are in some sort of talks that could lead to a cessation of hostilities, Israel continues to attack Iran, with a major strike on Tehran right after Trump’s Monday message. And even if the 4-week-old conflict is brought to a close this week, the oil market still faces weeks and months of pain due to backlogged tankers and shutdown production facilities that will leave a gaping hole of about 9 million barrels a day in global supplies in April. 

That’s one reason oil executives warn that the market actually is tighter than traders seem to think and why investment banks such as Goldman Sachs expect oil prices to remain in the triple digits in the near future.

That’s also why Trump has offered sanctions relief to not only Russia—enabling previously stranded and sanctioned Russian crude to be sold freely, enriching the Kremlin—but also Iran. The sanctions relief for Tehran will enable it to earn billions of dollars in additional revenue by selling its oil at market prices, not discounts, to willing buyers in Asia, particularly China. Trump on Monday dismissed concerns that the sanctions relief would enrich the regime he was at war with, saying: “I just want to have as much oil in the system as possible.”

But nowhere is the damage from the war likely to be felt as immediately or to last as long as in the market for liquefied natural gas (LNG). 

About one-fifth of the world’s LNG normally passes through the Strait of Hormuz, which remains effectively closed to container ships, bulk carriers, and tankers of all types except a handful that Iran lets pass. About 90 percent of the gas that comes out of the Persian Gulf—basically from Qatar and the United Arab Emirates—goes to Asia, and right now, the very last prewar tankers are arriving with cargoes. No more are on the way.

“It’s a big impact on China, Japan, Taiwan, Pakistan, Bangladesh. Some are more exposed than others, but all across Asia it is used for power generation and for industry, so there will be cascading impacts,” said Anne-Sophie Corbeau, a natural gas expert at Columbia University’s Center on Global Energy Policy.

The disruptions, and soon-to-be lack of LNG altogether, show up most clearly in gas prices in Asia, which have doubled since the war began. Some Asian countries are chasing LNG supplies on the “spot” market, rather than relying on long-term contracts, but Europe is chasing many of those same spot cargoes. (One country, again, stands to benefit: Vietnam is reportedly in talks with Russia’s Novatek to get LNG supplies from the Arctic.) Those higher prices have direct impacts on consumers (i.e., higher power bills) and industrial users. 

The bad part for gas consumers, especially in Asia but also in Europe, is that even if the U.S.-Israeli war comes to a speedy conclusion and the Strait of Hormuz begins to return to normal shipping flows, it will take time to get back to normal energy flows. Qatar, the world’s second-largest exporter of LNG after the United States, shut down all of its production at its massive Ras Laffan facility after a pair of Iranian attacks. (Two of the 14 units, or “trains,” at the gas liquefaction facility were severely damaged.)

“These trains need to be restarted sequentially, one or two at a time, and they need to restart them very slowly. If everything goes well, the whole restart will require four to six weeks. This is not coming back immediately,” Corbeau said.

Some of that facility won’t be coming back for years. Those two damaged trains, accounting for 17 percent of Qatar’s LNG production, will take three to five years to repair, QatarEnergy said last week, with a $20 billion hit to revenue every year they are offline.

And while there are additional supplies of LNG coming online this year, in Australia, Canada, and the United States, those were meant to add to the global gas market, not to get it back to where it was before the war. That means that, in a best-case scenario, the well-supplied global LNG market that Europe and Asia were counting on this summer will be pushed back until later next year.

“2026 is going to be at the same level as last year, and we may not even see the big relief in 2027,” Corbeau said.

That’s clearly bad for Asia, which is most reliant on the particular gas flows out of the Persian Gulf, but it’s also bad news for Europe, which has been dealing with energy trauma since Russia’s invasion of Ukraine four years ago. Europe was counting on a buoyant gas market this summer to refill its natural gas storage to be in a position, again, to weather another winter of Russian attacks on Ukrainian energy facilities, which often require backstopping Kyiv with fuel.

“Storage is the most important thing this year. Europe will need a lot of LNG in 2026 because the storage is lower than last year,” Corbeau said.