Energy Currents
A Blog by Enerdynamics

Fighting in the Gulf: The Natural Gas Business Will Never Be the Same

by Bob Shively, Enerdynamics President and Lead Facilitator

The Supply Shock: How Big, and Why It Matters

The natural gas world changed dramatically on March 2, 2026, when the Strait of Hormuz — a narrow waterway at the mouth of the Persian Gulf — effectively closed to LNG tanker traffic. That date marks the beginning of a market shock that is rippling across every sector of the natural gas value chain.

The Strait of Hormuz is the single exit point for LNG exports from Qatar and the United Arab Emirates, which together account for roughly 20% of global LNG trade. When the strait closed, that supply — about 11.6 billion cubic feet (bcf) per day —vanished from world markets. There is no pipeline bypass, no alternate shipping route. The gas stays landlocked in the Persian Gulf until the strait reopens.

Compounding the problem, Iranian missile strikes on Qatar’s massive Ras Laffan liquefaction complex in mid-March damaged two production trains with a combined capacity equivalent to about 1.7 bcf per day of LNG. According to QatarEnergy, repairing those trains will take three to five years. On top of that, Qatar’s planned North Field East expansion — a major new project expected to come online in late 2026 — has been delayed by at least a year.

The International Energy Agency estimates the combined effect of near-term supply disruptions and medium-term infrastructure damage will result in a loss of roughly 4,240 bcf of cumulative global LNG supply between 2026 and 2030. The anticipated “LNG wave” of new supply that was expected to ease global prices has been pushed back by at least two years.

How the Market Is Responding

Global gas markets reacted swiftly and sharply. European benchmark prices (TTF) surged 70% in the first two trading days after the Hormuz closure. Asian spot LNG prices more than doubled over the same period, briefly topping $21 per MMBtu — their highest level since early 2023. Price volatility on Asian markets reached its highest point since March 2022.

On the supply side, producers and governments have scrambled to fill gaps. The U.S. Department of Energy authorized Plaquemines LNG to increase exports by 13% and authorized higher exports from the Elba Island terminal. Australia and Singapore issued a joint statement indicating they would cooperate to facilitate the availability of alternative LNG supplies. New U.S. liquefaction projects from Plaquemines and the Corpus Christi expansion — along with LNG Canada — have been ramping up, with North America accounting for nearly 90% of global incremental LNG supply growth this winter. China, which had significant amounts of LNG in storage, sold spot cargos into the market.

Demand-side responses have been equally dramatic. Europe, Japan, Korea, and Thailand facilitated the use of coal generation to replace gas power. Korea also accelerated nuclear restarts. India invoked emergency powers to prioritize household and fertilizer-sector gas supplies. Numerous countries in Asia and Europe implemented demand reduction programs such as reducing air conditioning loads.

The combined actions of suppliers and consumers have helped prevent a complete market collapse.

What This Means for U.S. Gas Markets

The U.S. gas market has traditionally been shaped primarily by domestic factors — weather, production levels, storage, and power demand. Henry Hub prices have not spiked the way European and Asian prices have. The reason is a combination of robust U.S. domestic production, above-average storage inventories, and the seasonal drop in weather-driven demand — all of which have kept domestic fundamentals relatively loose even as global markets tighten. U.S. export terminals are also already running near maximum capacity, which limits how much additional global demand can pull on domestic supply, capping the immediate transmission of overseas price spikes into the U.S. market. Looking ahead, however, that insulation is likely to thin: if the conflict drags on and removes more Middle Eastern LNG from global markets, buyers worldwide will increasingly compete for marginal U.S. cargoes, pushing feed gas demand higher. Add a possible cold winter, surging data center electricity load, and significant new pipeline and liquefaction capacity coming online through 2027, and the structural price floor at Henry Hub is likely to rise — meaning the next major weather event or supply disruption could produce a sharper domestic price spike than anything we’ve seen from this conflict so far.

For U.S. producers, the picture is bullish but uneven. The forward curve at Henry Hub shows prices firming through summer and climbing above $4/MMBtu heading into winter 2026/27. But there is a limit to how much producers will benefit. U.S. LNG exports, already running near record levels close to 20 Bcf/d, are now approaching the upper limits of available export capacity.

For pipeline companies, the growth opportunity is real. Firm pipeline capacity across the U.S. is now essentially fully subscribed. Every major new pipeline going through an open season is seeing strong interest. The Southeast corridor is particularly stressed, with rapidly growing power generation demand — fueled by data centers and electrification — competing directly with LNG export terminals for available supply.

For utilities and industrial users, the era of cheap, plentiful interruptible gas supply may be over. During Winter Storm Fern in January, 44 pipelines curtailed supply to manufacturers. Industrial users who rely on interruptible service are increasingly being squeezed out by firm transportation holders tied to LNG export contracts and power generation needs. The advice from market experts is consistent: establish hedging programs now, understand your utility’s tariff structure, and don’t assume the spot market will always be there at a reasonable price.

For energy consumers broadly, higher and more volatile prices are the new reality. The forward market is already pricing in the possibility of another cold winter. And more potential bad news – the many regions of the U.S. that have gas-fired power generation on the margin will also see power costs rise. Whether consumers like it or not, the Middle East conflict has accelerated a structural transformation already underway in the U.S. gas market. LNG exports have made Henry Hub a de facto global price — and global crises will show up in your gas and electric bills.

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