Northeast Asia’s liquefied natural gas (LNG) market is grappling with a major supply shock following the closure of the Strait of Hormuz, a key trade route responsible for nearly a fifth of global LNG exports.
According to new analysis from Wood Mackenzie, regional demand could fall by four to five million tonnes through the third quarter of 2026 if supply disruptions persist for two months.
The closure has removed 1.5 million tonnes (2.2 bcm) per week from global LNG supply — equivalent to 19 per cent of global exports.
With around 90 per cent of LNG exports from Qatar and the UAE destined for Asia, the region is the most exposed to the fallout.
Wood Mackenzie’s analysis assumes the conflict will disrupt flows to Asia from mid-March to mid-May, with Qatari production gradually returning to pre-crisis levels by late May.
The market shock has sent Asian LNG spot prices surging above US$20/mmbtu.
“Asian LNG spot prices have surged above US$20/mmbtu, shifting from a discount to a premium relative to European prices,” said Miaoru Huang, research director, Asia Pacific gas and LNG at Wood Mackenzie.
“A sustained premium is needed to draw Atlantic Basin cargoes away from Europe and toward Asia. Current forward curves imply at least a month of disruption, with prices easing from June.”
Despite efforts to source additional cargoes, alternative supply routes are insufficient to offset the lost Qatari volumes.
Analysts warn that higher coal utilisation in power generation and reduced industrial gas use are likely to follow.
The final Qatari shipments loaded before the Strait’s closure are expected to reach Asia by mid-March, after which the region will face a structural shortfall due to longer shipping distances from alternative suppliers.
Northeast Asian buyers, Japan, South Korea and the Taiwan region, are expected to replace between 70 per cent and 90 per cent of their exposure, while Mainland China may only replace 50 per cent, citing weak gas demand and high inventories.
“Japan is comparatively well positioned to manage the disruption due to its limited reliance on Qatari supply and recent nuclear restarts,” said Jingxiao Du, senior research analyst, Asia Pacific Gas & LNG Research at Wood Mackenzie.
“Utilities can redirect some FOB (Free on Board) cargoes back to the domestic market rather than trading them internationally, while higher nuclear output will help offset LNG demand.”
Japan’s major power utilities held inventories of 2.19 Mt as of 1 March, equivalent to around 22 days of supply.
South Korea, meanwhile, faces greater exposure at elevated prices.
“While its LNG stocks provide a temporary buffer, moderate supply gaps and over 20 per cent spot LNG exposure strain power utilities,” said Kai Dong, principal analyst, Asia-Pacific Gas & LNG at Wood Mackenzie.
“Coal switching can reduce spot needs,” Dong added.
“If disruptions exceed two months, South Korea may have to relax seasonal coal curtailments as a contingency measure.”
Taiwan region could be among the most exposed importers globally.
Qatar and the UAE supplied 8.4 Mt (or 35 per cent) of its 2025 LNG imports.
With its last nuclear unit shuttered in mid-2025 and several coal plants retired, fuel-switching options are limited.
While Taiwan’s Ministry of Economic Affairs said on 9 March that it has secured 91 per cent of expected April LNG arrivals, volatile spot procurement will add cost pressures.
Taiwan region’s state utilities, CPC and Taipower, may be forced to either purchase expensive spot LNG or restart mothballed coal units to avoid power shortages — both of which will drive energy costs sharply higher.
“The supply shock will force short-term demand adjustments across the region,” Huang added.
“Higher spot prices will drive greater coal utilisation in the power sector and may hold back industrial gas consumption in some markets.”
