APAC faces multi‑year LNG supply loss amidst Gulf conflict

The Hormuz closure removed around 80 million tonnes per annum of LNG from the market.

Asia-Pacific (APAC) needs greater flexibility in sourcing liquefied natural gas (LNG) as a multi-year supply loss looms amidst the Gulf conflict, Wood Mackenzie said.

The region has been disproportionately affected by the disruption to global LNG supplies caused by the war on Iran, Nikhil Babu, Research Analyst for APAC Power & Renewables Research at Wood Mackenzie, said. 

“With 90% of LNG through the Strait of Hormuz flowing east, disruption to global LNG supplies caused by the war on Iran have disproportionately affected the [APAC] region,” Babu said.

The closure of the strait removed around 80 million tonnes per annum of LNG from the market, equivalent to around a fifth of global supply.

Babu warned that the disruption is not a short-term price spike but a multi-year supply loss, as Iranian strikes on LNG plants at Ras Laffan have removed significant Qatari export capacity for up to five years.

Reopening the strait will restore much of the supply lost to the Asian market since March, but there will be no “back to normal” as significant Qatari export capacity remains offline, he said.

The brunt of the risk is backloaded into the second half of 2026, with the supply loss hitting APAC markets when power systems had the least flexibility to absorb a shortfall amidst record temperatures.

“However, whilst some countries have moved past the period of greatest cooling-driven demand, others peak later,” he added.

Exposure also varies by country, depending on the role of gas in the generation mix and the diversity of gas supply.

One country scores highly on both factors, leaving it vulnerable to Gulf LNG at roughly seven times the cost of its domestic gas, Babu said.

To address the risks, he said the best combination of solutions for individual countries will depend on the specific characteristics of their markets.

“For utilities, route and counterparty diversification is now a security requirement rather than a cost-optimisation measure. Meanwhile, for developers, the impact on gas economics is likely to drive an accelerated renewables-and-storage pipeline,” Babu said.