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Informist, Thursday, Jun. 25, 2026

 

By Anand JC

 

MUMBAI – The signing of a memorandum of understanding between the US and Iran and subsequent measures such as the removal of the naval blockade in the Strait of Hormuz and sanctions on Iranian oil may have brought prices of crude oil back to pre-war levels, but those of liquefied natural gas are expected to face upward pressure for some more time, analysts said. Having risen sharply after the war in the Persian Gulf to levels not seen since the Russia-Ukraine war, prices of LNG are expected to remain higher until at least the final quarter of 2026 as global markets struggle with supply disruptions from Qatar and a tighter supply-demand balance. Analysts say high prices of LNG can lead to demand destruction, especially in Asia's emerging markets, which may cause a lasting delay in gas adoption.

 

"The next three to four months are where, potentially, the upward pressure is (on LNG prices)," Johan Utama, the senior principal analyst of gas research in South and Southeast Asia at S&P Global Energy, told Informist. "Europe needs to refill its (gas) storage while you see some Asian summer demand. Then beyond winter, when supply (from) Qatar is restored, plus the new additional supply would push down the pressure (on LNG prices)," Utama said.

 

The prices of LNG soared as the war broke out in the Persian Gulf, which caused severe infrastructural damage in the region and upended energy supply chains. Spot prices of LNG for delivery to North Asia jumped from a little over $10 per million British thermal units from the last week of February, when the war broke, to as high as $25 by mid-March. As of last week, the prices have moderated to around $15 per mmBtu, nearly 50% higher than the pre-war week, according to Reuters.

 

Restoring normalcy via the Strait of Hormuz emerged as the key bargaining point between the two warring nations as they forced through a temporary peace pact. Flow of LNG, among other key commodities like crude oil, was choked at this point as flows from Qatar and the UAE came to a grinding halt. "The impact on global LNG prices has been pronounced, particularly due to Qatar's dominant position as the world's second-largest exporter, with around 112 bcm (billion cubic metres) of LNG exports in 2025, compared to ~7 bcm from the UAE," Pranav Master, senior practice leader and director at Crisil Intelligence, said. "This disruption has led to a significant supply shock in the LNG market due to the inability to export LNG via alternative routes," he added.

 

The supply of LNG has taken a major beating this year so far. Oslo-based energy research firm Rystad Energy expects about 20 million tonnes of LNG supply to be wiped out in 2026. In contrast, supply rose by 18.8 million tonnes in 2025. "We see a structural impact on demand for LNG, the market is going to be in deficit in 2026," its chief economist Claudio Galimberti said at an event recently. "Price of LNG will not crash; they will remain relatively high...(but) they will remain slightly lower than we were forecasting before (when the war broke out)," Galimberti said. The firm expects production of LNG to climb a staggering 55 million tonnes in 2027.

 

As per Rystad Energy's base case assumption, wherein the warring nations sign a 60-day deal, and the Strait of Hormuz is not fully de-politicised, spot prices of LNG in Asia could average $17 per mmBtu in 2026. In their most optimistic assumption, wherein the two nations fully resolve all issues and shipping insurance prices revert to pre-war levels, spot prices of LNG in Asia may average $14 per mmBtu in 2026. To repeat, LNG traded around $10 per mmBtu the week before the war started.

 

The average spot price of LNG in FY26 was the lowest since FY21, when it was trending around $6 per mmBtu, before shooting up to nearly $24 in FY22 and $31 in FY23 because of a spike in demand and the Russia-Ukraine war.

 

WAR ON GAS

The war in the Persian Gulf structurally altered the global LNG landscape. Qatar, a small, thumb-shaped peninsula located on the northeastern coast of the Arabian Peninsula, processes and exports 20% of global LNG through natural gas facilities in Ras Laffan Industrial City. LNG supply from Ras Laffan collapsed after infrastructure damage due to the war, as the country cut LNG output and declared force majeure on LNG shipments. "Ras Laffan may be repaired (fully) three-five years down the line. Supply of global LNG will be restored to pre-war level only five years down the line," Galimberti said.

 

For India, which relies on imports to meet almost 90% of its energy needs, the supply chain situation was even more dire. Qatar supplied around 45% of India's LNG in 2025. Qatar will now resume normal LNG production within a few weeks, British news daily Financial Times reported, quoting the Gulf nation's Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani.

 

Petronet LNG Ltd., India's state-backed natural gas importer, expects volume from Qatar to be at full utilisation, for non-damaged capacity within six weeks of the opening of the Strait of Hormuz, Nomura Research quoted the company's management as saying late last week. Petronet LNG acts as the primary gateway for foreign gas entering India.

 

Natural gas currently accounts for less than 10% of India's primary energy mix, with plans well underway to increase it to 15% by 2030. Yet it is important as it plays a key role in meeting demand for the fertiliser industry, heavy industries, household kitchens, and urban transit.

 

Unlike other nations in Asia, such as Japan and South Korea, that cut imports of LNG after prices shot up, India absorbed cost premiums to get energy from other sources instead. As a result, India's import of LNG did not face much of an impact after the war broke out, in terms of volumes imported. On an average, India imported 2.33 million tonnes of LNG per month in Apr-Feb. In May, India imported 2.21 million tonnes of LNG and has imported 2.10 million tonnes in June so far, according to data from maritime intelligence firm Kpler.

 

India turned to the US, Nigeria, Oman, Angola, and others to fill the Qatari LNG gap after the war broke out. Qatar exported no LNG to India in April and May, but shipments have started picking up slowly, data shows. "Despite paying a premium over legacy Qatari contract prices, India had no choice but to absorb the cost differential. That makes India a price-inelastic large LNG buyer in Asia," Equirus Securities said in a report recently.  End

 

(With inputs from Afra Abubacker in New Delhi)

 

Edited by Deepshikha Bhardwaj

 

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