An intensifying competition for liquefied natural gas is breaking out between Europe and Asia as Qatar’s LNG infrastructure suffers serious damage from the Iran conflict, threatening to remove roughly 20% of global LNG supply from the market for weeks or months. The competition is already driving European gas prices to three-year highs and adding to an energy crisis that has also seen oil prices surge past $90 a barrel.
Qatar is the world’s most important LNG exporter, and its difficulties are creating immediate problems for buyers worldwide. An Iranian drone strike has damaged a key LNG terminal, and the country’s energy minister has warned that even an immediate ceasefire would leave exports offline for weeks or months as repairs are made. For European buyers who had been counting on Qatari supplies, the disruption forces an urgent search for alternatives.
The challenge for European buyers is that they are not searching in an empty market. Asian economies, particularly Japan, South Korea, and China, are also heavy LNG consumers and are competing for the same limited pool of available cargoes. The result is a bidding war that is driving up spot LNG prices globally. Britain, while only directly dependent on Qatar for about 2% of its gas, has seen its gas market surge to three-year highs as European prices are pulled upward by this competition.
The LNG crisis is unfolding alongside an equally severe oil market emergency. Brent crude has surged more than 25% in a single week — its biggest gain since the Covid-19 pandemic — as the Iran conflict disrupts tanker traffic through the Strait of Hormuz and creates a storage crisis across the Gulf. Kuwait has been forced to cut production and Saudi Arabia and UAE face the same situation within 20 days.
The dual oil and gas shock has sent financial markets into turmoil. Stocks fell sharply across Asia, Europe, and the UK. Bond yields surged, rate cut hopes died, and airlines issued profit warnings. Qatar’s energy minister warned that continued conflict could push oil to $150 a barrel — a forecast that, given the week’s events, has lost whatever quality of hyperbole it might once have had.