Natural gas prices have reacted strongly to QatarEnergy’s decision to cease LNG production and the closure of the Strait of Hormuz amid escalating conflict in the Middle East escalate. Still, despite a more than 52% surge at Europe’s benchmark Title Transfer Facility (TTF) on 2 March, Rystad Energy expects the current supply shock to have a limited long-term impact on global gas and liquefied natural gas markets.
This outlook is based on the expectation that the disruption will be temporary and manageable in terms of volumes.
Here is Rystad Energy’s gas market update from Jan-Eric Fahnrich, Senior Analyst, Gas & LNG Research, Rystad Energy:
“With Qatari LNG output halted and the Strait of Hormuz closed, global LNG supply is set to tighten sharply, a trend already reflected in recent price movements.
The scale of lost volumes will depend on the extent of any infrastructure damage, which is still being assessed, and the duration of the Strait’s closure to maritime traffic.
In a scenario where there is limited or no damage and hostilities subside quickly, leading to a 15-day production halt, we estimate a 4.3% decline in 2026 output, equivalent to around 3.3 million tonnes (Mt) .
A more prolonged disruption could result in 5.6 Mt of lost supply, while a full-scale interruption lasting four to five weeks before the Strait reopens to commercial traffic would translate into a loss of approximately 11.2 Mt for the full year 2026.
Given the central role of LNG exports in Qatar’s economy and in global trade flows, we expect production to be restored within weeks rather than months.”
Should a worst-case scenario manifest, opportunistic producers could bring to market up to 15 Mt of incremental LNG, while the reintegration of Russian LNG could yield another 18 Mt.
With this being said, the most affected countries are chiefly price-sensitive, developing economies that are much more likely to seek refuge in fuel-switching, focusing on thermal coal more so than similarly affected oil products, rather than triggering a bidding war.
QatarEnergy halts production
Maritime traffic through the Strait of Hormuz had already stalled when QatarEnergy halted LNG production following a drone strike on its gas facilities in Ras Laffan on 2 March. The stop, without an announced end date, affects Qatar’s entire liquefaction capacity of 77 million tonnes per annum (Mtpa) currently. While the events certainly cloud Qatar’s medium-term outlook, the LNG powerhouse is set to nearly double its capacity to 142 Mtpa within the next decade by adding 64 Mtpa across three expansion phases – North Field East (32 Mtpa), North Field South (16 Mtpa) and North Field West (16 Mtpa). NFE's first train is expected online in 3Q26, barring infrastructure damage or continued shipping difficulties. NFS targets first gas in late 2028 or early 2029 and NFW took FID only days ago.
Could an extended closure catapult Russia back into the market?
LNG markets entered the year with growth expectations. Pre-war, Rystad Energy expected producing facilities to add 13.9 Mt and start-ups (or re-starts in the case of Darwin LNG) to contribute 7.6 Mt over and above 2025 volumes. Spurred by higher-than-anticipated prices, facilities in West Africa and the US could likely increase LNG output somewhat, unlike previous net-exporter Egypt whose gas balance is suffering due to the cessation of Israeli pipeline exports.
Even so, should Qatar’s facilities sustain further damage, or should Iran dissuade commercial shipping through the Strait by means of force, much higher volumes could be removed from the global LNG balance in 2026. If such a worst-case scenario does materialize, reintroducing Russian LNG could become a point of discussion. Compared to 2025, sanctions relief alone could reinject up to 5.3 Mt plus another 12.8 Mt from Arctic LNG 2. The reintroduction of Russian volumes, however, hinges on lifting all sanctions and Europe buying most Russian LNG to support shipping logistics. This course of action would undermine long-term US LNG expansion by exacerbating oversupply concerns once Qatari volumes come back or even pave the way for the return of Russian pipeline supply. Since both are diametrically opposed to US interest, it must be considered extremely unlikely.
Why a price spiral is unlikely
The ongoing US-Israel campaign in the Middle East is set to tighten global gas supply in 2026.
However, these developments are unfolding in a market characterized by relatively looser balances and expanding trade flows, with a different set of countries at the center of the disruption and distinct demand side responses emerging as a result.
The impact is likely to fall most heavily on price-sensitive South Asian buyers, including Bangladesh and Pakistan, rather than on premium markets willing to bid aggressively for cargoes. While large-scale demand curtailment may appear to be the most direct adjustment mechanism, gas is deeply embedded in the primary energy mix of these economies.
As a result, we expect a combination of demand restraint and, where technically feasible, fuel switching. That said, higher crude and oil product prices could constrain the scope for switching,
Authors:
Xi Nan
Partner, Head of Gas & LNG Markets
xi.nan@rystadenergy.com
Kaushal Ramesh
Senior Analyst, Gas & LNG Markets
kaushal.ramesh@rystadenergy.com
Jan-Eric Fähnrich
Senior Analyst, Gas & LNG Markets
jan-eric.fähnrich@rystadenergy.com
Mrinal Bhardwaj
Senior Analyst, Oil and Gas
mrinal.bhardwaj@rystadenergy.com
Lu Ming Pangsenior
Analyst, Gas & LNG Markets
luming.pangsenior@rystadenergy.com
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