LNG

QatarEnergy’s first LNG train under the North Field East expansion is expected to be ready to start operations in November, people aware of the company’s plans told Reuters, though start of commercial production could be delayed until the first quarter of 2027 as shipping through the Strait of Hormuz remains constraint.

QatarEnergy CEO Saad al-Kaabi has identified shipping logistics as the biggest hindrance to resuming LNG exports from Ras Laffan once the Strait of Hormuz reopens, underlining tight tanker availability and routing constraints may impact the recovery of one of the world’s largest LNG export terminals.

Chinese-linked ships have been using their identity to transit the Strait of Hormuz on March 1-8, Lloyd’s List Intelligence data shows. None of the six vessels were oil or LNG tankers.

The Chinese government is urging Iran to ensure safe passage for Qatari LNG carriers and crude oil tankers through the Strait of Hormuz, as Beijing relies heavily on these imports. Shipments have dropped from an average 20 to 24 LNG tankers per day at the beginning of 2026 down to zero.

Japan’s three major shipping lines – Nippon Yusen, Kawasaki Kaisha and Mitsui O.S.K. – have suspended all vessel transit through the Strait of Hormuz following US and Israeli air strikes on Iran. Instead, they order LNG carriers and crude oil tankers to standby in the Persian Gulf in safe waters, impacting prices.

Prompt prices at the Dutch TTF gas trading hub are rising on mounting risk that US strikes Iran – now seen as “more likely than not” – could threaten LNG trade flows via the Strait of Hormuz. Approximately 7.1 million tons per month of LNG from Qatar and the UAE currently transits the Strait of Hormuz, or one-fifth of global LNG trade.

High spot LNG prices and subdued demand from industry made China’s LNG import plunge by more than 20% in the first quarter of this year. Fast build-out of liquefaction capacity in the US, Canada and Qatar will ease market tightness from 2026, fostering robust demand growth in Asia’s price-sensitive markets, the International Energy Agency (IEA) forecasts.

Thailand’s Energy Regulatory Commission (ERC) is stepping up efforts to mitigate risks posed by disrupted LNG trade flows through the Strait of Hormuz. Nearly two-thirds of Thailand’s electricity comes from gas-fired power stations which largely depend on imported LNG, making them vulnerable to supply shortages and geopolitical risk.

Baseload US LNG supply to Asia – price-insensitive volumes that will head to the Pacific Basin regardless of JKM–TTF spreads – is averaging 20 percent, or 1.7 million for July. Outturn JKM prices are hovering around $12.98 per MMBtu, with analysts carefully observing developments around the Strait of Hormuz.

Escalating tensions between Israel and Iran have pushed up crude oil prices to nearly $75 per barrel. The geopolitical risk premium has soared to around $8 per barrel, impacting oil-indexed natural gas contracts as well as term LNG deliveries.

The outlook hinges on Iran’s response. If the regime in Teheran keeps airstrikes focussed on Israeli military sites, as seen in past episodes, price increases may remain contained and temporary, Rystad analysts reckon. But if Iran escalates by disrupting crude oil and LNG shipments through the Strait of Hormuz, or attacks regional energy infrastructure, prices could go through the roof.

In an undisguised threat, US President Donald Trump warned the Iranian regime to stay clear on attacking American military bases in the Middle East, or face dire consequences. 

Nautical chokepoint

The Strait of Hormuz – a key nautical route between the Mediterranean and the Red Sea – is the chokepoint in this scenario. Around 12 million barrels per day of crude oil pass through the strait, over 80% of it bound for Asia. Additionally, over 3.5 billion cubic feet (bfc) of natural gas, or 18% of world shipments, travel through the strait onboard of LNG tankers.

Though there is a pipeline to bypass the Strait of Hormuz, the capacity of that pipeline is limited. Saudi Arabia’s East-West oil pipeline and the UAE’s Habshan-Fujairah oil pipeline together can handle around half of the flow. As for natural gas, the Abqaiq-Yanbu pipeline runs parallel to the East-West Petroline in Saudi Arabia, bypassing the Strait of Hormuz. Its capacity is 290,000 barrels per day, carrying primarily gas liquids.

To date, Iran never succeeded in blocking the Strait of Hormuz which is jointly controlled with Oman. Past tactics included seizing or harassing tankers by jamming their GPS signals to draw them into Iranian waters.

“If Iran were to attempt a full-scale blockade of the Strait, it would likely face strong international pushback,” Rystad head of geopolitical analysis Jorge León warns. Retaliatory actions are to be expected particularly from countries of the Gulf Cooperation Counci, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Even Iran’s key ally, China, would be hit hard by higher oil and LNG prices, he underlined, stressing such a move would isolate Iran politically and economically.

Beware shipping rates

Peter Sand, Xeneta chief analyst takes a similar view: “Any closure of the Strait of Hormuz would see services re-routed, with increased reliance on India West Coast ports for connecting the Far East to Indian sub-continent,” he noted. The inevitable disruption and port congestion, as well as the potential for higher oil prices, would cause a spike in ocean freight container and LNG shipping rates.

Average spot rates from Far East to North Europe are up 62% since early December 2023, just before escalation in the Red Sea, while average spot rates to US East Coast – another trade that would ordinarily transit the Suez Canal – are up a staggering 165%, analysts pointed out.