War in the Middle East: the liquefied gas market will remain “tense” until 2027

The consequences of the war in the Middle East on liquefied gas (LNG) production will be felt for at least two years, and the market will remain “tense” in 2026 and 2027, the International Energy Agency (IEA) warned on Friday.

Damage to gas liquefaction infrastructure, particularly in Qatar, is expected to delay the impact of an expansion in global LNG production by at least two years, the IEA estimated in a report published Friday. And if new projects should compensate over time, the IEA anticipates that the market will remain “tense in 2026 and 2027”.

“The combined effect of short-term supply losses and slowing capacity growth could lead to a cumulative loss of around 120 billion cubic meters of LNG between 2026 and 2030,” further details the organization created in 1974 after the oil crisis, with the founding mission of ensuring energy security.

“Strengthen security”

The IEA calls for “strengthening the security of global LNG supplies” by investing across the entire value chain and “strengthening international cooperation between producers and consumers”. It also calls on importers to diversify their long-term contracts to reduce the risk of price volatility.

The war in the Middle East led to an abrupt upheaval in the market with the de facto closure of the Strait of Hormuz to LNG carriers, which transport LNG.

“Overall production fell 8% year-on-year, with sharp declines in exports from Qatar and the United Arab Emirates,” only partially offset by higher production in other parts of the globe.

Disruptions “began to spread across global supply chains” and LNG deliveries began to fall, “with a steeper decline observed in April.”

Before the outbreak of war, the market was relaxing with the deployment of new liquefaction capacity, particularly in North America, “helping to drive down prices”.

The war, which deprived the market of around 20% of LNG stocks that previously passed through the Strait of Hormuz, pushed prices to their highest since January 2023, contributing to a reduction in demand, the IEA observed. Some major consuming countries have in fact taken measures to reduce their consumption.