Despite the ongoing war between Iran and the U.S.-Israel coalition and the resulting blockade of the Strait of Hormuz, the global market is bracing for an unprecedented glut of liquefied natural gas (LNG). The closure of the strait cut off 20% of the world’s LNG supply and sent benchmark prices skyrocketing in March 2026, with the Asian JKM benchmark briefly hitting $30 per million British thermal units. Furthermore, a March attack on Qatar’s Ras Laffan LNG complex reduced the nation’s production capacity by 17%, with repairs estimated to take three to five years.
However, energy analysts note that the contours of a long-term surplus are already emerging. This impending glut is driven by dramatic shifts in both supply and demand:
- Supply Diversification: Having witnessed the vulnerability of the Persian Gulf, Asian policymakers are prioritizing supply diversification. Buyers are aggressively financing new LNG projects outside the Middle East, particularly in North America, Africa, and Latin America.
- Massive Capacity Expansion: There is a global pipeline of over 700 billion cubic meters of new LNG projects awaiting final investment decisions, which could more than double the global supply if built.
- Demand Destruction: The geopolitical crisis has caused lasting reputational damage to LNG’s reliability. Asian nations are actively pivoting away from the fuel; for example, Vietnam recently scrapped a massive 4.8 GW LNG-to-power project. Instead, countries are shifting toward cheaper and more secure alternatives like solar power, batteries, coal, and nuclear energy.
While LNG prices may remain elevated in the short term as Europe rebuilds its inventories for the 2026-2027 winter, today’s high prices have sown the seeds for tomorrow’s low prices, signaling that a buyer’s market is on the horizon.