Key facts
- The Strait of Hormuz, a critical chokepoint for global LNG and oil, has been effectively closed due to a conflict involving Iran.
- Qatar Energy halted LNG production following Iranian drone attacks, removing a significant portion of global supply.
- The disruption has forced a shift in energy procurement strategies from lowest-cost to security of supply.
- US LNG exporters are expected to benefit from increased demand as Europe and Asia scramble for alternative supplies.
- Shell forecasts global LNG trade to remain flat in 2026 as a result of the ongoing supply chain disruptions.
The global Liquefied Natural Gas (LNG) market is undergoing a structural shift following a military conflict between a US-Israel coalition and Iran that escalated in early 2026, leading to the de facto closure of the Strait of Hormuz. This chokepoint typically handles 20-25% of global LNG supply, primarily from Qatar and the UAE.
The conflict, exacerbated by a withdrawal of war risk insurance for tankers, made transit through the strait commercially unviable. A significant blow came when Qatar Energy announced a complete halt to LNG production at its facilities after Iranian drone attacks, removing approximately 80 million tonnes per annum (MTPA) from the market. This event alone removed about 17% of Qatar's export capacity for several years.
The disruption has led to a severe supply crisis, with Middle East seaborne exports slashed by more than half and estimated regional oil production shut-ins of 7-10 million barrels per day. Brent crude spot prices averaged $103 per barrel in March 2026 and are projected to peak near $115 per barrel in the second quarter.
Consequently, Europe and Asia are now in direct competition for secure LNG supplies from non-Persian Gulf sources, predominantly the United States. US LNG exporters, such as Cheniere and Freeport LNG, are expected to benefit from this scramble and capture significant market share. Shell anticipates that global LNG trade will remain flat in 2026 due to these persistent supply chain disruptions, marking an end to an era prioritizing lowest-cost procurement over security of supply.