The International Energy Agency released its Gas Market Report for the second quarter of 2026, revealing that the Middle East conflict has fundamentally altered global natural gas market dynamics and disrupted the anticipated expansion of liquefied natural gas supply. According to the IEA executive summary, the de facto closure of the Strait of Hormuz at the beginning of March 2026 created unprecedented uncertainty in international gas markets. The disruption resulted in the loss of almost 20% of global LNG supply, causing severe price volatility and driving natural gas prices in both Asia and Europe to their highest levels since the 2022-23 energy crisis.
Global LNG production experienced a dramatic reversal, shifting from double-digit growth to contraction. In March 2026, global LNG production fell by 8% year-on-year, with loadings from Qatar and the United Arab Emirates declining by 9.5 billion cubic meters compared with the previous year. However, the impact on LNG deliveries was less severe, declining by just 2% in March but falling 10% year-on-year in the first 20 days of April, as shipping delays meant the full market impact took time to materialize.
Prior to the Middle East crisis, natural gas markets had been experiencing significant rebalancing. During the 2025-26 heating season from October through February, global LNG trade grew 12% year-on-year, or 29 billion cubic meters, supported by new liquefaction projects notably in North America and stronger output from legacy exporters. The Plaquemines LNG plant in Louisiana alone accounted for almost half of the incremental LNG supply during this period.
Consequently, natural gas prices in Asia and Europe softened during this period, with European TTF prices falling 24% in the first two months of 2026 compared with the year prior, while Asian Platts JKM prices declined 27%. Colder weather conditions and lower natural gas prices supported stronger gas demand across Asian markets, with consumption increasing 2% year-on-year during the October-February period. In contrast, natural gas consumption fell by nearly 1% in Europe, as increased electricity generation from renewables reduced gas burn in the power sector.
Despite lower demand, Europe's LNG imports reached an all-time high over the 2025-26 winter, establishing LNG as a structural source of baseload supply amid lower piped gas imports and declining domestic output. Following the Strait of Hormuz closure, spot prices soared dramatically. In March 2026, European TTF month-ahead prices averaged USD 18 per million British thermal units, while Platts JKM traded close to USD 21 per MBtu.
Price volatility spiked to unprecedented levels, with TTF month-ahead volatility reaching 160% in March, its highest monthly level since September 2023, while JKM volatility soared close to 300%, its highest level since March 2022. The spread between JKM and TTF prices reversed from a European premium of USD 0.9 per MBtu in January-February to an Asian premium averaging USD 2.8 per MBtu in March, encouraging LNG cargo diversification toward Asian markets. The IEA report states that the LNG supply losses from Qatar and the United Arab Emirates are expected to total around 20 billion cubic meters for the March-April period, with restart and ramp-up of liquefaction plants potentially requiring several weeks.
Damage to Qatar's LNG liquefaction infrastructure has significantly reduced the outlook for global LNG supply growth over the medium term. The agency estimates that damage to Qatar's LNG facilities could reduce the country's output by nearly 70 billion cubic meters by 2030, assuming a four-year repair period. Additionally, delaying the North Field East expansion project could reduce LNG supply by close to 20 billion cubic meters over the 2026-2030 period.
The combined effect of near-term supply disruptions and medium-term implications has resulted in cumulative LNG supply losses of around 120 billion cubic meters for 2026-2030, accounting for approximately 15% of expected global LNG supply over that period. The IEA emphasizes that the Middle East crisis has delayed the anticipated LNG wave—a period of significant supply growth—by at least two years. This postponement will alter the medium-term outlook for natural gas markets substantially.
The report notes that natural gas demand fell in key LNG import markets in March, driven by weather-related factors, higher prices, and demand-side policy measures. Preliminary data suggests that Europe's natural gas consumption fell around 4% year-on-year in March, primarily driven by lower gas use in the power sector amid strong increases in wind and hydropower generation. In response to the supply disruptions, suppliers have taken steps to boost LNG deliveries.
The United States Department of Energy authorized the Plaquemines LNG plant in mid-March to increase exports by 13%, or 4.6 billion cubic meters annually, to both free trade agreement and non-free trade agreement countries. The Elba Island LNG plant received authorization in early April to increase exports by 22%, or 0.8 billion cubic meters, to non-free trade agreement countries. Australia and Singapore issued a Joint Statement on Economic Resilience and Essential Supplies in early April to support the flow of essential goods including LNG.
The IEA concludes that the current crisis highlights the critical need for strengthened global gas supply security architecture. The agency emphasizes the importance of continued adequate investments across the gas and LNG value chains and other energy sources to strengthen supply security and support balanced growth. The heightened price volatility underscores the advantages of diversified long-term contracts with sophisticated pricing formulae for both buyers and sellers.
The IEA supports international cooperation between gas producers and consumers through its Gas Working Party and the LNG Producer-Consumer Conference organized jointly with Japan's Ministry of Economy, Trade and Industry.
Source: iea.org