Gas
Iran conflict chokes Middle East LNG and spikes Asian spot prices
Natural gas demand across South Asia has fallen sharply as conflict in Iran blocks vital supplies from the Persian Gulf and drives up spot prices.
Key points
- Wood Mackenzie reports South Asian gas demand will crash by about 6 million tons due to the conflict.
- Blocked routes through the Strait of Hormuz trapped LNG supplies from Qatar and the UAE.
- India absorbed shocks better than neighbors due to a diversified supplier base including Nigeria and the US.
What happened
Natural gas demand in India has fallen by 1.5 million tons so far this year as ongoing conflict involving Iran restricts liquefied natural gas supplies from the Middle East, according to a report by energy consultants Wood Mackenzie. The hostilities have trapped shipments from Qatar and the United Arab Emirates within the Persian Gulf, leaving no alternative route to bypass the Strait of Hormuz.
Before the disruption, analysts anticipated that South Asian LNG demand would expand by 7% this year. Instead, demand is projected to drop by approximately 6 million tons across the region. Bangladesh experienced a 3 million ton reduction in gas demand, while Pakistan and India each saw declines of about 1.5 million tons.
Why it matters
Pakistan and Bangladesh faced more severe supply constraints than India because their procurement strategies relied heavily on a narrow range of suppliers. According to local media reports, Pakistan faces costs exceeding $1 billion to secure winter supplies as Asian spot prices reach three-year highs.
India navigated the crisis with more resilience by maintaining a diversified supplier base that includes the United States, Oman, and Nigeria, alongside Middle Eastern producers. Wood Mackenzie noted that India's tender award prices climbed to $26.4 per million British thermal units by September, up from $16.8 to $18.8 between March and June 2026, yet demand in tenders remained steady.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Gas is the flexible backbone of many grids and the designated transition fuel in many national plans, from LNG trade to domestic LPG and CNG. Supply security and pricing drive both power reliability and emissions.
2.9% of electricity in India came from gas in 2024Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
