IEA says Middle East gas shock could keep LNG markets tight through 2027
The International Energy Agency said July 7, 2026, that the Middle East conflict has delayed the expected easing of global liquefied natural gas markets, leaving prices and supply conditions more exposed through 2027.
The IEA’s Gas Market Report, Q3-2026 forecasts global natural-gas demand will decline by about 0.5%, or 20 billion cubic metres, in 2026 as higher prices reduce use in power generation and industry. That is not a forecast of a guaranteed worldwide shortage. New production outside the Gulf is expected to offset much of the immediate loss. The main change is that the supply wave expected to ease LNG markets has been pushed back, leaving a longer period of tighter and more volatile conditions than previously expected.
What changed in the Gulf
The Strait of Hormuz carried almost 20% of global LNG supply before the conflict. The IEA says LNG-carrier traffic increased after a mid-June interim agreement between the United States and Iran, but volumes remained only a fraction of pre-conflict levels.
The IEA’s forecast assumes the Strait fully reopens during the third quarter of 2026 and that undamaged regional facilities are restored by early in the fourth quarter. Those are analytical assumptions, not confirmed outcomes. The agency says any delay beyond the beginning of the fourth quarter could push global LNG supply into its first annual decline since 2012.
Between March and June, LNG loadings from Qatar and the United Arab Emirates fell by 35 billion cubic metres year over year. Non-Gulf LNG production rose by about 27 billion cubic metres, offsetting roughly three-quarters of the Gulf decline. Even so, total global LNG production fell 4%, or 8 billion cubic metres, during that period, according to the IEA.
For all of 2026, the IEA forecasts Qatar and UAE LNG supply will fall about 45%, or 54 billion cubic metres, from 2025. New projects in North America, Africa and Australia are expected to add close to 50 billion cubic metres, while existing projects may contribute more than 10 billion cubic metres as feedgas availability improves. Those increases are expected to keep global LNG supply broadly flat for the year under the report’s assumptions.
Why 2027 remains the pressure point
The IEA estimates cumulative LNG supply losses of about 140 billion cubic metres from 2026 through 2030. That is equivalent to about 15% of the new global LNG supply expected during the period, with most of the effect concentrated in 2026 and 2027.
Damage to regional infrastructure, including Qatar’s Ras Laffan site, is central to that assessment. The Associated Press reported that an explosion at the Barzan gas supply facility in Qatar’s Ras Laffan industrial area killed at least 13 people and injured 66 others as workers tried to resume operations. AP also reported that the scale of the damage remained unknown. That incident provides operational context, but the IEA’s broader forecast depends on several factors: shipping access, repairs, restarts and the timing of Qatar’s planned capacity expansion.
The result is a timing problem. LNG projects approved or developed later in the decade may add substantial supply, but they cannot immediately replace Gulf volumes disrupted in 2026 and 2027 or eliminate the risk of further shipping interruptions.
What it means for energy users
Gas prices in Asia and Europe have moderated from their March highs but remain above 2025 levels. The IEA says second-quarter average prices rose year over year, with Europe’s TTF benchmark near $16 per million British thermal units and Asia’s spot LNG benchmark near $17.50.
Higher gas prices can encourage power producers to switch to coal or other fuels where available. Industrial users may reduce operations, switch feedstocks or face higher costs. LNG-importing countries could therefore see continued price volatility even if new production prevents a full global supply collapse.
The consequences extend beyond electricity and heating. Natural gas is a key feedstock for ammonia and urea, which are used in nitrogen fertilizer. The IEA says reduced LNG availability has already contributed to lower fertilizer-production rates in some Asian markets that rely on Middle Eastern imports, including Bangladesh, India and Pakistan.
Earlier World Bank analysis, published May 14, linked the Strait disruption to higher fertilizer prices and projected further 2026 increases, while warning that risks would remain elevated if energy and shipping disruptions continued. A prolonged gas shock could raise costs for farmers and increase food-security pressure in vulnerable importing regions, especially in Africa. The available evidence does not establish a universal or immediate increase in food prices.
What to watch next
The most important indicators are LNG-carrier traffic through the Strait of Hormuz, Gulf export loadings, progress repairing and restarting facilities in Qatar, and the pace at which new capacity comes online in North America, Africa and Australia.
The central risk is not necessarily an energy shortage everywhere. It is that the IEA’s conditional recovery takes longer than assumed, delaying the expected supply wave and keeping global gas markets more expensive and unsettled through 2027.
Sources
- IEA — Gas Market Report, Q3-2026 executive summary
- Associated Press — Qatar gas facility explosion
- World Bank — Fertilizer prices and Strait disruptions
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