Iran Conflict Chokes Global Gas Supplies as U.S. Prices Drop

A conflict with Iran that began on February 28 has disrupted approximately 20% of global liquefied natural gas (LNG) supplies. The supply crunch follows Iranian missile strikes in March that shut down Qatar's Ras Laffan liquefaction complex, with repairs expected to take up to five years. Additionally, the closure of the Strait of Hormuz has blocked shipments from Qatar and the United Arab Emirates.

Global markets responded with sharp price increases, with natural gas prices rising by up to 84% in Europe and 108% in Asia. European benchmark prices remained volatile on May 4, initially dipping after Donald Trump announced the U.S. would guide ships through the Strait of Hormuz, only to rebound after Iran warned the U.S. against entering the waterway.

In contrast, U.S. benchmark Henry Hub futures fell 12% to a 17-month low of $2.52 per mmBtu. Despite being the largest producer, the U.S. cannot export the surplus quickly due to pipeline bottlenecks in the Permian Basin and export plants operating at near capacity. While Cheniere Energy and Venture Global profited by selling spot cargoes, domestic producers like EQT Corporation curtailed output to manage the low domestic prices and preserve reserves for future demand.