IEA: High Prices Suppress Demand, Global LNG Supply Faces First Contraction in 14 Years
0xBroomberg
The IEA warned Tuesday that the US-Iran conflict has cut Strait of Hormuz LNG shipments by nearly 80%, with surging prices now suppressing global gas demand — if the strait is not fully reopened by Q4, global LNG supply could post its first annual decline since 2012.
How much have gas prices risen?
Europe's benchmark TTF — the continent's main gas trading price — averaged $16 per million BTU in Q2, up 32% year-on-year.
Asia's spot LNG price (JKM benchmark) averaged $17.50 per million BTU in Q2, up 45% year-on-year.
This means → both benchmarks hit their highest Q2 averages since the 2022 energy crisis, pushing the market back into a "high prices kill demand" cycle.
How are high prices crushing demand?
The IEA projects global gas demand will fall roughly 0.5% in 2026 — a drop of about 20 billion cubic meters and the decade's third annual decline.
Asian gas demand fell about 1% year-on-year in the first half, with power generators switching heavily to coal. India, Bangladesh and Vietnam — countries previously expected to ramp up gas use — are now reassessing their energy-transition plans.
European demand keeps sliding as surging renewable generation systematically squeezes gas out of the power mix. Middle Eastern consumption has also dropped, partly because the conflict itself disrupted production and local use.
What happened on the supply side?
The Strait of Hormuz normally carries roughly 20% of global LNG supply. After the US-Iran conflict erupted, LNG shipments from Qatar and the UAE plunged nearly 80% between March and June compared with the same period in 2025.
In plain terms = the corridor that moves one-fifth of the world's LNG was almost entirely shut, and the Gulf's two largest exporters saw their cargoes grind to a halt.
The IEA had previously warned that each month the strait is blocked wipes out roughly 10 billion cubic meters of LNG supply. Qatar Energy's North Field East expansion has also been delayed by the conflict, cutting an estimated 20 bcm of LNG supply across 2026–2030.
Will the annual contraction actually happen?
Higher output elsewhere — mainly in the US — has partly offset the Gulf shortfall. The IEA expects total 2026 global LNG supply to be roughly flat versus 2025.
But the agency issued a clear warning: if the Strait of Hormuz is not fully reopened before Q4, global LNG supply could record its first annual decline since 2012.
This reflects a dramatic reversal. At the start of the year the IEA forecast 2026 global LNG output would grow more than 7% — over 40 bcm. The swing from "strong growth" to "possible contraction" shows how completely the conflict has rewritten expectations.
Has the ceasefire removed the risk?
The US and Iran reached an interim peace deal in mid-June, and strait traffic improved. Yet on the same day the IEA published its report (July 7), a fully laden Qatari LNG carrier was struck by a projectile in the Gulf of Oman as it exited the strait; the engine room caught fire.
US media reported that Iran's Revolutionary Guard fired at least two missiles at several commercial vessels transiting the strait — just three weeks after the two sides signed a memorandum of understanding.
Shell warned the same day that its integrated gas output had fallen sharply from Q1. Qatar accounts for about 10% of Shell's global oil-and-gas production. This means → the ceasefire has not translated into actual shipping safety. Whether the strait can be reliably reopened before Q4 remains the single most important variable in determining whether global LNG avoids its first annual contraction in fourteen years.
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