Middle East crisis deepens fears of a prolonged global gas supply squeeze

10:15

By: Azzat Manal

Middle East crisis deepens fears of a prolonged global gas supply squeeze

The disruption caused by the Middle East crisis is increasingly raising concerns that tight natural gas supplies could persist well beyond the coming winter, adding pressure to an already fragile global energy market. Industry representatives say the disruption of liquefied natural gas (LNG) flows from the Gulf is complicating efforts by major importing regions to secure enough fuel and rebuild depleted inventories.

The International Gas Union has warned that market expectations are shifting toward a longer period of supply tightness. Forward gas prices now suggest that traders are preparing for elevated prices and continued supply risks into the summer of 2027, rather than expecting the market to ease shortly after winter.

The Strait of Hormuz has become a central point of concern because it is a critical route for LNG shipments from major Middle Eastern exporters. The International Energy Agency estimates that LNG flows through the strait had represented almost 20% of global LNG supply before the disruption caused by the conflict. Although shipments have gradually resumed, volumes remain well below pre-crisis levels, keeping uncertainty high.

Europe is particularly exposed as it enters the winter season with gas storage levels below the levels seen in previous years. Reuters reported that European reserves were around 67% full in September, leaving the region facing a difficult balancing act between rebuilding stocks, meeting winter demand and competing with Asian buyers for available LNG cargoes.

The pressure is not limited to Europe. Asian LNG importers are also seeking to diversify their supplies and delivery routes as disruptions in the Gulf affect traditional trading patterns. Countries including Thailand and Bangladesh are looking toward suppliers in West Africa, Indonesia, North America and Australia, while energy companies are accelerating efforts to secure alternative sources of gas.

The supply shock has so far been partly cushioned by additional production from other regions, particularly the United States. The International Gas Union said the reduction in Middle Eastern production was being offset to some extent by stronger output elsewhere, while new LNG capacity is helping limit the overall impact on global availability. Nevertheless, the redistribution of cargoes is intensifying competition between importing markets.

Europe is also preparing to further reduce its dependence on Russian gas. Under the European Union's current measures, Russian LNG imports under long-term contracts are due to be prohibited from January 1, 2027, while restrictions on short-term contracts are being implemented earlier. The policy is part of the EU's broader effort to eliminate Russian gas imports, adding another factor to the region's supply planning.

The combination of geopolitical uncertainty, limited storage buffers and competition for flexible LNG cargoes could keep energy prices volatile over the coming months. A colder-than-expected winter would put additional pressure on both European and Asian buyers, while any further disruption to Gulf exports could quickly tighten the market.

For gas-importing economies, the current situation highlights the growing importance of supply diversification, storage capacity and long-term contracts. While new LNG projects and rising production outside the Middle East can gradually improve global availability, industry officials caution that replacing disrupted Gulf volumes is not an immediate process, leaving markets vulnerable to further shocks.