Northeast Asia’s LNG market faces a major supply shock following the closure of the Strait of Hormuz, with regional demand expected to fall by 4 – 5 million t through 3Q26 if supply disruptions last for two months, according to new analysis from Wood Mackenzie.
The closure has removed 1.5 million t/w (2.2 billion m3) from global LNG supply, equivalent to 19% of global exports. With around 90% of LNG exports from Qatar and the UAE destined for Asia, the region is most exposed to the disruption.
Asian LNG spot prices surge above US$20/million Btu
Wood Mackenzie’s analysis assumes that the conflict will disrupt LNG supply to Asia for around two months, from mid-March to mid-May, with Qatari production gradually ramping back to pre-crisis levels by the end of May.
“Asian LNG spot prices have surged above US$20/million Btu, 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 sources cannot fully replace Qatari volumes. As a result, demand destruction is likely, particularly through higher coal utilisation in power generation and reduced industrial consumption.
April to test LNG market dynamics across Northeast Asia
The final Qatari cargoes loaded before the Strait closure are expected to arrive in Asia by mid-March. After that, the region will face a structural supply shortfall due to longer shipping routes from alternative suppliers.
Wood Mackenzie expect that Northeast Asian buyers including Japan, South Korea and Taiwan region will look to replace between 70% and 90% of the exposure as they have to LNG imports from Qatar and the UAE. However, Mainland China might only look to replace 50% of their exposure, because of current weak gas demand and leveraging on high inventories and greater fuel switching flexibility across industry and power.
“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 free-on-board (FOB) cargoes back to the domestic market rather than trading them internationally, while higher nuclear output will help offset LNG demand,” Du continued.
As of 1 March, inventories held by Japan’s major power utilities stood at 2.19 million t, equivalent to around 22 days of supply.
South Korea faces greater exposure at elevated prices. “While its LNG stocks provide a temporary buffer, moderate supply gaps and over 20% spot LNG exposure strain power utilities,” commented Kai Dong, Principal Analyst, Asia-Pacific Gas & LNG at Wood Mackenzie.
“Coal switching can reduce spot needs. If disruptions exceed two months, South Korea may have to relax seasonal coal curtailments as a contingency measure,” Dong added.
Northeast Asia LNG demand growth likely to stall
Wood Mackenzie previously projected 4.4 million t (2.2%) growth in Northeast Asian LNG demand in 2026, but the Strait of Hormuz disruption is likely to halt that expansion.
“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.”
Even after a ceasefire, some demand loss may persist as fuel switching continues and LNG prices remain elevated compared with pre-crisis levels.
In addition, the lag in oil-indexed LNG pricing formulas means contract prices will increase later in the year. With most LNG contracts linked to oil prices on a three-month lag, import costs for Asian buyers are expected to rise from June 2026 onwards, adding further pressure to regional energy bills.
Taiwan region faces greatest supply pressure globally
Wood Mackenzie noted that Taiwan region could be one of the most exposed LNG importers globally under the current scenario.
Qatar and the UAE accounted for 8.4 million t, or 35%, of Taiwan region’s LNG imports in 2025. With its last nuclear unit shut in mid-2025 and several coal units retired in recent years, fuel-switching options are limited.
The Ministry of Economic Affairs noted on 9 March that Taiwan region has secured 91% of expected April LNG arrivals. However, with spot market exposure already exceeding 30% of imports, additional procurement during a period of extreme volatility would significantly increase costs for CPC and Taipower.
Taiwan region will be forced either to purchase expensive spot LNG or restart mothballed coal units to avoid power shortages. Either choice will drive energy costs significantly higher.