OPINION | Pain ahead for Europe as Iran war drives gas prices higher at critical juncture

No LNG collapse

The massive disruption to Middle Eastern exports is unlikely to ease soon.

LNG exports from the Persian Gulf, primarily from Qatar but also from the United Arab Emirates, fell by more than 85 per cent between March and August compared with a year earlier, according to Kpler data.

The disruption is likely to persist through the end of the year as shipping traffic through Hormuz remains constrained. QatarEnergy has already notified key customers that it has extended its force majeure suspension on LNG deliveries until early November.

Yet the global LNG market was supported by rapid production growth elsewhere, particularly in the US and Canada. According to the International Energy Agency, LNG production outside the gulf grew by 18 per cent, or around 27 bcm, in the year to the end of June, offsetting roughly 75 per cent of the losses from the Middle East.

That helps explain why prices, while at painful levels, remain far below the extraordinary peaks reached during the 2022 energy crisis, when benchmark European gas prices briefly exceeded €300 per MWh.

Nevertheless, given the current backdrop, the upside risk at current levels is enormous.