The escalation of the US-backed Israel-Iran conflict has triggered fresh volatility in global energy markets, this time centred not just on crude oil, but liquefied natural gas (LNG).
As tensions disrupted supplies from Qatar, one of the world’s largest LNG exporters, European gas prices surged sharply. At the same time, US LNG producers have moved quickly to capitalise on the supply shock, reported The Financial Times.
The ripple effects are now being closely watched in India, which remains heavily dependent on imported LNG and crude oil transiting through the Strait of Hormuz.
Europe’s Gas Shock: Prices Surge Over 40%
European gas markets reacted immediately to supply disruptions from Qatar. According to Bloomberg, the Dutch TTF natural gas contract, Europe’s benchmark, jumped nearly 45 per cent to above €46, marking its largest weekly gain in almost four years after QatarEnergy confirmed that output had been suspended.
Moneycontrol reported that European natural gas prices eventually settled 39 per cent higher at €44.51 per megawatt-hour, the highest in about a year. UK natural gas prices climbed 45 per cent to 113.79 pence per therm.
By contrast, US natural gas prices rose only 3.5 per cent to $2.96 per million British thermal units, highlighting the divergence between regional markets.
The disruption followed an Iranian drone attack that forced QatarEnergy’s Ras Laffan LNG plant, which produces roughly a fifth of global LNG supplies, to shut down. The company has not yet provided clarity on the extent of damage or timelines for restarting production.
US Exporters Rush To Fill The Gap
As European and Asian buyers scrambled for cargoes, US LNG exporters moved swiftly.
According to the Financial Times, Venture Global and Cheniere Energy, two of the largest US LNG producers, are seeking to extract additional volumes from facilities in Texas and Louisiana and accelerate capacity expansion as consumers from the UK to Japan brace for shortages.
Traders and buyers of US LNG, once described by the Trump administration as “freedom molecules”, are also reportedly rerouting cargoes to take advantage of soaring spot prices.
The US surpassed Qatar and Australia as the world’s largest LNG exporter in 2023, shipping over 100 million metric tonnes overseas. However, several new plants under construction will take months or years to become fully operational.
Golden Pass, a major Gulf Coast facility in Texas backed by ExxonMobil and QatarEnergy, is expected to begin production within weeks but will require months to reach full capacity.
Can The US Replace Qatar?
Energy analysts caution that while US exporters are benefiting from the price spike, they cannot fully offset prolonged Middle Eastern disruptions.
“Nothing can make up for the loss of Qatari LNG,” Saul Kavonic, head of energy research at MST Marquee, told the Financial Times. He warned that if shutdowns are prolonged or infrastructure is damaged, the gas market could face a shock even larger than in 2022, when Russia curtailed pipeline gas supplies to Europe.
Scott Shelton, energy specialist at TP ICAP, noted the physical constraints. “Whatever we can put on a boat we are going to send. But even if prices go up 100 per cent from here, we are still limited.”
Alex Munton of Rapidan Energy Group told the Financial Times that commodity traders with US supply and free-on-board cargoes stand to benefit significantly, as they can resell those cargoes at sharply higher international prices.
Venture Global, which sells over 30 per cent of its LNG cargoes at spot prices, has seen stronger share price gains compared with Cheniere, which sells less than 10 per cent at spot rates.
Shipping Costs Add Another Layer
The strain is not limited to commodity pricing.
Bloomberg reported that shipowners and brokers in the Atlantic Basin are demanding more than $200,000 per day for LNG tankers, roughly double what they were commanding less than 24 hours earlier. These offer rates were at least three times higher than the $61,500 assessed by Spark Commodities earlier Monday.
However, Richard Pratt of Precision LNG Consulting told Bloomberg that actual transacted rates are unlikely to soar unless production cuts in Qatar and Abu Dhabi are prolonged. Longer sailing distances from the US to Asia could also influence pricing dynamics.
What This Means For India
India imports around 60 per cent of its LNG, primarily from Qatar and the UAE, with most cargoes transiting the Strait of Hormuz.
According to Business Today, government officials indicate that India has sufficient buffer stocks to manage short-term disruptions. Strategic reserves can support LPG and LNG demand for around 15 days, while crude oil reserves may last up to 45 days in the event of supply disturbances.
However, higher LNG costs have broader economic implications. LNG is a key input for fertiliser production, power generation and city gas distribution networks. Rising import costs could increase domestic energy tariffs or expand subsidy burdens.
Analysts told News18 that every $1 increase in crude oil prices raises India’s annual import bill by approximately $2 billion, highlighting the macroeconomic sensitivity to sustained energy price volatility.
The Hormuz Factor
The broader risk remains the Strait of Hormuz, a critical maritime chokepoint through which a significant portion of India’s crude oil and LNG imports pass.
For now, global gas markets are reacting to immediate supply shocks, while US exporters seek to monetise elevated prices. For India, the key variables remain duration and escalation.
Short-term buffers may provide breathing space. But if disruptions persist, the impact could extend beyond energy markets — affecting inflation, trade balances and fiscal calculations in the months ahead.
