Rystad Energy has highlighted the potential risks to global liquefied natural gas (LNG) supplies due to escalating tensions between Iran and Israel. The Strait of Hormuz, a vital maritime route through which approximately 20% of the world’s LNG exports pass, is at the centre of these concerns. Following Israel’s strikes on Iranian sites on 13 June, retaliatory actions by Iran have raised fears of potential disruptions in this critical waterway.
The Strait of Hormuz, jointly controlled by Iran and Oman, is the only passage for vessels from the Persian Gulf to the open ocean. Any disruption could severely impact LNG exports from Qatar and the UAE, which together account for 27% of Asia’s and 8.5% of Europe’s LNG imports. Lu Ming Pang, a senior analyst at Rystad Energy, emphasised the importance of keeping the Strait open, stating, “It’s in the best interest of all Middle Eastern countries to keep the Strait of Hormuz open and prevent any supply disruption.”
Recent market reactions have been swift. European gas prices at the Title Transfer Facility (TTF) rose by 6.3% to $13.42 per million British thermal units (MMBtu) on 16 June, whilst East Asia Spot LNG prices increased by 8.9% to $13.58 per MMBtu. These price hikes reflect market concerns over potential supply shocks reminiscent of the 2022 Russian pipeline disruptions.
The US, with its Fifth Fleet stationed in the region, along with Middle Eastern LNG exporters, is keen to maintain stability. However, the ongoing conflict underscores the fragility of global energy supply chains and the potential for significant economic impacts if the Strait of Hormuz were to be closed.
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