Natural Gas: Hormuz Risks and Qatar LNG Disruption - BNY

Geopolitical risks in the Middle East are spreading from the crude oil market to the global natural gas supply chain. BNY's Geoff Yu noted that Middle East tensions and restricted transit conditions in the Strait of Hormuz are putting key energy supply routes at risk. As Qatar is one of the world's major LNG exporters, and the vast majority of its cargoes must transit the Strait of Hormuz to reach Asia and Europe, market concerns over supply disruptions have risen notably.

**Asia Most Exposed**

Asia is the primary destination for Qatari LNG exports. Public data shows that last year, over four-fifths of Qatar's LNG exports flowed to Asian buyers, with China being the largest buyer—nearly one-third of its imported LNG came from Qatar—and India ranking as the second-largest importer. Tom Marzec-Manser, head of European LNG and gas research at Wood Mackenzie, stated that any military activity in the Strait of Hormuz would have a particularly bullish impact on prices, as would any disruption to Qatari LNG production.

**Dual Constraints on Shipping and Production**

Vessel tracking data shows that at least 11 LNG carriers bound for or departing from Qatar have paused voyages to avoid the Strait of Hormuz. Major LNG shipowners, including Nippon Yusen Kaisha and Mitsui O.S.K. Lines, have also instructed their vessels to avoid the relevant area. Meanwhile, one production unit at Qatar's Ras Laffan integrated complex is undergoing planned maintenance, which traders say will lead to lower output. Anne-Sophie Corbeau, a research scholar at Columbia University's Center on Global Energy Policy, pointed out that this passageway is "irreplaceable," and whether Asia or Europe sees larger price increases depends on inventory levels and the scale of rerouting.

**Market Fears of a Repeat Supply Shock**

Some analysts are drawing parallels between the current situation and the 2022 European gas crisis. Wood Mackenzie believes that Asia is particularly vulnerable to the knock-on effects of a worsening Middle East crisis. If transit through the Strait of Hormuz remains constrained, compounded by disruptions on Qatar's production side, Asian buyers could face more intense competition for spot cargoes, while Europe would also come under pressure due to relatively low inventory levels. Going forward, attention should be paid to the pace of Qatari export recovery, the feasibility of alternative shipping routes, and the inventory response capabilities of major Asian importing countries.