Global Gas Demand Expected to Fall for First Time Since 2022 Due to Iran War

According to the latest report from the International Energy Agency (IEA), ongoing conflicts in the Middle East, particularly the U.S.-Iran tensions, have triggered a significant supply shock in the global natural gas market. As a result, high natural gas prices are expected to curb global demand, leading to the first annual decline since the 2022 energy crisis. The IEA forecasts a 0.5% decrease in global natural gas demand this year.

With the escalation of the Middle East conflict in late February, a de facto closure occurred in the strategic Strait of Hormuz, through which approximately one-fifth of global Liquefied Natural Gas (LNG) supply passes. This disruption led to sharp price volatility in international markets. Specific events, such as Israel's targeting of Iran's South Pars gas field and Iran's retaliatory strike on the largest LNG facility in the United Arab Emirates (UAE) in March 2026, further exacerbated market fragility.

Market indicators clearly demonstrate the impact of the conflicts on energy prices. Europe's benchmark natural gas price, the Dutch TTF, surged by 32% year-on-year in the second quarter to average $16 per million British thermal units (MBtu). Asia's spot LNG prices (JKM) also increased by 45% over the same period, reaching $17.5/MBtu and recording their highest second-quarter averages since 2022. Furthermore, Brent crude oil prices rose above $100 between March and May, creating a destructive effect on demand. Consumers in Asia began using less gas or switching to alternative fuels like coal due to high prices.

These developments highlight the continued fragility of global natural gas markets following the energy crisis triggered by the Russia-Ukraine War in 2022. At that time, supply disruptions and price increases also led to a drop in global gas demand. The current tensions in the Middle East are reigniting energy security concerns, increasing pressure on global supply chains. The critical importance of the Strait of Hormuz underscores how decisive this tension is for both regional and global energy markets.

Analysts and market expectations suggest that if uncertainty in the Strait of Hormuz persists, the global LNG balance will tighten further, and competition for cargoes will intensify. Although traffic in the Strait has partially improved following an interim peace deal between the U.S. and Iran last month, clarity on a lasting solution remains elusive. A prolonged supply shock could lead to weaker imports across both the Atlantic and Pacific basins. If the Strait is not fully reopened before the start of the fourth quarter, global LNG supply could register its first annual decline since 2012.