Global energy markets have been plunged into deep uncertainty following the closure of the Strait of Hormuz, an escalation that has instantly wiped out 20 per cent of the world’s liquefied natural gas (LNG) supply, according to new analysis from research firm Wood Mackenzie.
Wood Mackenzie has modelled three global LNG scenarios following the closure of the Strait of Hormuz.
The report warns that a prolonged closure will drive oil, gas, and electricity prices significantly higher, compounding financial pressure on households and businesses worldwide.
“The Strait of Hormuz closure has done more than remove LNG from the market. It has removed certainty,” said Kateryna Filippenko, Wood Mackenzie’s Research Director for Global Gas Markets.
“There is no longer consensus on how the market evolves. Volatility is the new baseline.”
Wood Mackenzie has developed three potential recovery timelines through to 2045. One scenario assumes the strait reopens in June, with undamaged Middle Eastern facilities returning to full capacity by 2027.
Under a summer settlement scenario, restarts are delayed to September 2026, with full capacity by 2028, while in a extended disruption scenario, sporadic flare-ups and infrastructure damage keep Middle Eastern growth choked indefinitely, delaying major projects like Qatar’s North Field West.
A prolonged war could result in substantially lower Middle East LNG supply growth. Despite the immediate supply crunch, the report notes that more than 150 Mtpa of LNG capacity is currently under construction outside the Persian Gulf, primarily in the US.
An additional 30 Mtpa is expected to reach final investment decision (FID) by late 2027, which could spark a wave of new projects outside the Middle East to fill the deficit.
However, long-term global demand remains highly unpredictable. While falling domestic production in Europe and parts of Asia will continue to support LNG requirements, heavily exposed import nations are already exploring structural changes to actively diversify away from gas dependency to protect their economies.
European gas prices and Asian LNG benchmarks are projected to soften in all three scenarios once supply recovers, though at different speeds and to different levels.
US gas prices face upward pressure under extended disruption as lower oil price limits availability of low-cost associated gas.
