Expert Insights

It is no surprise that oil markets continue to move higher as the Strait of Hormuz remains effectively closed, disrupting roughly 20 million barrels per day of oil and petroleum products from reaching global markets. However, the conflict is now expanding, with strikes targeting oil storage facilities, pipelines, and—critically—natural gas infrastructure. While oil disruptions are significant and will likely be felt for months, the impact on liquefied natural gas (LNG) could prove even more prolonged and economically damaging.

Liquefied natural gas (LNG) is a relatively newer component of the global energy complex. It is created by cooling natural gas to approximately -260°F, converting it into a liquid form that significantly reduces its volume. This process allows LNG to be transported efficiently across long distances by specialized tankers. LNG has become essential for countries in Asia and Europe, supporting heating, power generation, and industrial demand. Europe has increasingly relied on LNG imports to replace Russian natural gas following the ongoing Russia–Ukraine conflict.

Unfortunately, LNG infrastructure is now coming under direct threat in the Middle East, creating supply disruptions that are far more difficult to offset due to limited global capacity. Iran’s largest gas field, South Pars, was reportedly struck, and in retaliation, Iran targeted the Ras Laffan LNG hub in Qatar—responsible for approximately 20% of global LNG supply. Reports indicate “extensive damage,” with production taken offline.

While the United States is a major LNG exporter, its current capacity is constrained at roughly 16 billion cubic feet per day. Although new export facilities are under construction, meaningful capacity increases will not fully materialize until later this decade, with gradual ramp-ups expected by 2030.

Given the limited ability of global markets to backfill disruptions from a critical hub like Ras Laffan, LNG prices have surged. Dutch TTF natural gas futures—closely tied to regional LNG pricing—spiked approximately 18% overnight.

This underscores a key point, the current energy shock extends well beyond oil flows. If LNG infrastructure continues to be targeted, global natural gas markets could face a more persistent supply imbalance, increasing the risk of sustained inflationary pressure worldwide.