Gas markets brace for prolonged tightness as Iran war disrupts supply

Global gas markets are increasingly pricing in tight supplies well beyond the coming winter, as the Iran war disrupts Gulf liquefied natural gas exports and complicates Europe's efforts to rebuild inventories, a senior industry figure has said.

Forward prices suggest traders expect elevated costs and supply risks to persist through next summer before easing, according to Menelaos Ydreos, secretary general of the International Gas Union, whose members represent more than 90% of the global gas market.

"The market right now is saying that they see the conflict getting prolonged," Ydreos said. Current futures curves point to tight conditions continuing into next year — a marked shift from a few months ago, when traders expected prices to ease after winter.

The uncertainty centres on the conflict's impact on exports from Qatar, one of the world's largest LNG suppliers. Europe is simultaneously competing with Asia for cargoes while trying to refill storage sites ahead of winter.

"Europe is starting to outbid Asia because they need to refill storage levels," Ydreos said, adding that the present crisis differs from the energy shock that followed Russia's invasion of Ukraine in 2022 because it is affecting multiple regions at once.

He noted some short-term demand destruction and said the question is whether it rebounds once conditions settle, or whether longer-term policy implications emerge.

Additional uncertainty stems from Europe's planned ban on Russian LNG imports from January. Russian cargoes currently heading to Europe would likely find alternative buyers, potentially at lower prices, but any disruption to those flows would add further strain to a market already grappling with concerns over Middle East supply.

European policymakers are also wrestling with how to balance climate goals against energy security and affordability. Ydreos said the European Commission should consider easing some implementation requirements while keeping emissions-reduction targets intact.

"We're for regulations, but they have to be achievable, practical and incentivise compliance," he said. "If regulations go far beyond that and make it extremely difficult for the industry to comply, they'll look for other regions to send their product."