The Iran War Just Added $39 Billion to the World's LNG Bill

The Middle East conflict has disrupted global energy flows, forcing countries to rethink supply routes and strengthen energy security. As more buyers turn to the spot market to replace disrupted volumes, Rystad Energy estimates that global LNG importers will spend at least $39 billion more on contracted and spot supplies in 2026, despite purchasing 60.7 million tonnes less. Disruptions to Qatari and UAE exports through the Strait of Hormuz are forcing buyers to secure replacement volume at higher prices. Total portfolio costs are expected to reach $256 billion, up 18% from a pre-war estimate, underscoring how importers face different levels of exposure depending on their contract coverage, pricing benchmarks and ability to reduce demand.Rystad Energy’s modeling assumes that Qatari and UAE LNG deliveries will be unavailable from March through the end of 2026. Under this scenario, global LNG portfolio costs rise from $217.8 billion to at least $256.3 billion. Europe faces the largest increase, with its LNG bill rising by a minimum of $12 billion, or 18%, even as demand falls by 24 million tonnes. Europe entered the crisis already heavily reliant on spot purchases, leaving less room to further boost that share further. As a result, its share of spot imports is projected to rise by just 5.49%, after factoring in demand destruction, compared with pre-war estimates. At the same time, Europe is set to lose 20.6 million tonnes of the 24.7 million tonnes of Qatari LNG scheduled for delivery in 2026, before the conflict began.East Asia is better positioned to weather the disruption, with spot purchases accounting for just 14.5% of imports. A broader portfolio of supply contracts outside the Middle East and lower LNG demand help limit the region’s exposure to disrupted Qatari and UAE deliveries. Despite having the largest nominal exposure to Gulf contracts, East Asia faces the smallest relative increase in LNG costs among the regions outside the Middle East, at 9.7%. South Asia, meanwhile, is adjusting primarily through lower imports, with Pakistan cutting purchases more sharply than India. In Africa and South America, Egypt and Brazil, respectively, are driving the rise in prices and import volumes, while the Middle East is adjusting through demand destruction.“This conflict has affected every player in the gas market to some degree, but not every economy is equally equipped to absorb the shock. Some importers are better positioned to manage rising costs, while others have had little choice but to cut volumes and absorb the economic consequences. The crisis exposes a fundamental weakness in gas security: diversifying pricing benchmarks can help manage costs, but it does not guarantee physical supply. Importers need to assess their exposure to supply disruptions alongside price risk, building contract portfolios around reliable delivery routes and demand that cannot easily be replaced. Ultimately, when cargoes can disappear overnight, the resilience of supply matters as much as the price paid for it," says Christoph Halser, Senior Analyst, Gas & LNG Research, Rystad EnergyEast Asia is coping with the disruption better than Europe, and the contract pricing terms are a key factor driving the divergence. Rystad Energy research shows that 82% of East Asia’s long-term LNG contracts are linked to oil, the price of which has risen far less than spot LNG. Those LNG contracts are up about 28% compared with 72% for those tied to hub and spot price benchmarks. In contrast, the average price in Europe is up 47%. Europe buys around 65% of its LNG on the spot market, while about a quarter of its long-term contracts are tied to gas price indexes, leaving it far more vulnerable to the full force of market volatility.In terms of implications for importers, Europe’s result exposes a strategic shortcoming in relying on spot liquidity to secure residual gas demand. Treating gas as transitional does not remove the need to procure volumes still consumed. Deferring term procurement before substitutes are available leaves importers exposed to replacement-cost shocks. Contract tenor and volume flexibility should match residual demand, with supply origins and routes diversified.Henry Hub indexation and supply routes address different risks, with our geostrategic analysis highlighting the value of ‘unchokeable’ supply that avoids maritime chokepoints or disputed waters. US Gulf Coast deliveries to Europe bypass the Strait of Hormuz, while deliveries to Asia may face Panama Canal constraints or require longer alternative voyages, making Australian and Canadian Pacific supply important alternatives. Importers should also scrutinize portfolio contracts for replacement obligations and sourcing flexibility when contracted cargoes cannot be delivered as planned.Expanding US liquefaction capacity creates further opportunities for importers to secure Henry Hub-indexed supply and diversify their exposure to global gas benchmarks, but it also strengthens the link between global LNG demand and the US gas market. Rising feedgas requirements from LNG terminals, alongside power-sector demand, could support Henry Hub prices even as new global liquefaction capacity eases spot prices in Asia and at the Dutch TTF benchmark. Importers should therefore assess whether the current cost advantage of Henry Hub-indexed contracts is likely to persist over the full contract term, rather than assuming today’s price advantage will endure.By Rystad EnergyMore Top Reads From Oilprice.comU.S. Partner in Venezuela Oil Deal Looks to Hike Crude ProductionU.S. Diesel at $6.30 a Gallon as First Russian Cargo Sets Sail for New YorkOil India Strikes Natural Gas in Shallow Offshore Basin