Kilns Gone Cold: How the Iran War Broke the Global LNG Market

The Strike That Changed Global Energy

In mid-March, Iranian missiles struck the Ras Laffan industrial city in Qatar — home to the world's largest LNG export facilities — and destroyed two LNG liquefaction trains and one gas-to-liquids unit. QatarEnergy CEO Saad Sherida al-Kaabi told Reuters that the attack wiped out approximately 17 percent of Qatar's LNG export capacity and would cost the country an estimated $20 billion per year in lost revenue, with rebuilding expected to cost $26 billion, per Semafor and Reuters.

The damage will sideline 12.8 million tonnes per year of LNG production for an estimated three to five years, per Reuters and Al Jazeera. Qatar operates 14 LNG trains; two were knocked out. Qatar's long-planned expansion — which aimed to grow annual LNG output from approximately 77 million tonnes to 142 million tonnes by 2030, per QatarEnergy CEO al-Kaabi's 2024 announcements — will now be delayed.

In response, QatarEnergy declared force majeure on some of its long-term LNG supply contracts, including for customers in Italy, Belgium, South Korea, and China, per Al Jazeera on March 24. Petroleum companies in Kuwait and Bahrain have also invoked force majeure clauses since the war began, per Al Jazeera. Force majeure legally excuses a party from contract obligations due to events beyond their control.

The Ras Laffan attack came in the context of Iran having essentially closed the Strait of Hormuz — through which about 20 percent of the world's oil and LNG supplies transit — since the war began February 28, per Al Jazeera.

The Numbers: How Bad Is the Price Spike?

Asia LNG spot prices have jumped 143 percent since the war began on February 28, according to Reuters, as of the week of March 26. At a more than three-year high of $25.30 per million British thermal units (mmBtu), prices are well above the $10 per mmBtu threshold at which emerging market demand typically picks up, per Reuters.

For context, the previous major LNG spike came after Russia's invasion of Ukraine in 2022. The current spike represents the second major supply shock in four years to the global gas market.

Consultancies S&P Global Energy, ICIS, Kpler, and Rystad Energy have all cut their global LNG supply outlooks for 2026 by as much as 35 million tonnes, per Reuters. S&P Global Energy expects a 33-million-ton drop in exports out of Qatar and the United Arab Emirates this year alone, and projected further supply shortfalls from 2027 to 2029 due to delays at Qatar's North Field expansion and ADNOC's Ruwais LNG projects in the UAE.

35 million tonnes of LNG is equivalent to approximately 500 LNG cargoes — enough to meet more than half of Japan's annual imports, or Bangladesh's LNG needs for five full years, per Reuters.

Rabobank projected Asia LNG prices to average $16.62 per mmBtu in 2026 and $13.60 in 2027. UBS raised its forecast even higher: $23.60 per mmBtu for 2026 and $14.50 for 2027, per Reuters.

S&P Global Energy analyst Lucien Mulberg told Reuters: "We expect this gas price crisis will lead some countries to reconsider growing their gas demand at the rate we previously forecast and so LNG demand growth will be lower than our pre-war forecast."

Pakistan: A Four-Day Work Week

Among the countries hit hardest is Pakistan — which is also, separately, trying to mediate between Washington and Tehran. Pakistan is heavily reliant on Qatar for LNG and has implemented a four-day work week as part of energy rationing, along with two-week school closures and a 50 percent reduction in government fuel allowances, per Reuters and Forbes.

Pakistan's gas market operator told Reuters: "There is a demand destruction process going on," per Iqbal Ahmed, Chairman and CEO of Pakistan GasPort, which co-owns an LNG import terminal. Demand is shrinking in energy-intensive sectors like fertilizers and textiles, per Reuters.

The country faces a structural vulnerability: it relies on LNG imports for industrial and residential gas supply, and has limited domestic alternatives in the short term. Qatar was Pakistan's primary LNG supplier before the war.

India: The Kilns of Morbi Go Dark

In Morbi, Gujarat — India's $6.5 billion ceramics manufacturing hub that employs hundreds of thousands of people and accounts for approximately 70 percent of India's ceramic tile exports — the kilns have gone silent.

India's government issued the Natural Gas (Supply Regulation) Order, 2026 on March 9, 2026, which curtailed natural gas supply to industrial users to 80 percent of average consumption, per the Indian Express. Ceramic tile kilns, which require continuous high-temperature gas combustion, cannot operate effectively at reduced supply. Sanitaryware units were expected to close entirely by approximately March 24, per Indian Express.

Around 420 to 430 units out of the roughly 700-unit Morbi cluster had halted production as of late March, per Mukesh Kundariya, chairman of Segam Tiles and advisor to the Morbi Ceramic Manufacturers Association, speaking to the Financial Express. Of the roughly 400,000 workers in Morbi's ceramic ecosystem, over 60 percent had returned to their native villages, per The Hindu BusinessLine.

"We are suffering a lot," Kishor Dulera, a tile unit proprietor who closed his factory and two others in early March, told The Guardian's Indranil Mukherjee. Dulera's three factory closures sent hundreds of workers home.

The closure of Morbi's units is not primarily caused by prohibitive prices; it is caused by physical unavailability of gas — the supply chain from the Gulf has been so disrupted that industrial users in India cannot obtain sufficient volumes even at elevated prices. Alternative fuels, including coal and biomass, are being explored by some Morbi operators, but the Financial Express reported that one industry official noted alternative fuels cannot replace gas "100 percent just yet" due to kiln quality requirements.

The Knock-On: Who Benefits, Who Absorbs the Pain

The supply disruption is not affecting all countries equally.

China, the world's largest LNG importer, is "better positioned" than South Asian buyers due to greater domestic gas production and higher volumes of Russian pipeline gas supply, per Reuters. China has been increasing LNG purchases from the Iranian-controlled corridor through Hormuz, accepting Iran's vetting process, and has largely maintained supply continuity.

Approximately 80 percent of Qatar's LNG supply goes to Asia, per Reuters. The price-sensitive buyers — Bangladesh, Pakistan, and India — are the most exposed to the demand destruction the price spike is inducing. Bangladesh and Pakistan are actively seeking alternative LNG supplies and switching fuels to coal and domestic gas, per Reuters and Semafor.

Europe, despite its own concerns, has a buffer: the EU urged member states to accelerate winter gas storage as early as March 21, per Al Jazeera, and European LNG terminal capacity has expanded significantly since the 2022 Ukraine crisis. The Atlantic Council noted in a March analysis that European exposure depends heavily on whether the conflict continues into late spring.

Laura Page, manager of LNG Insight at Kpler, told Reuters: "In the near term, the market rebalances primarily through higher prices and demand destruction in South Asia."

Historical Context: The Two Great LNG Shocks

The current disruption is the second major shock to the global gas market in four years. The first came with Russia's invasion of Ukraine in February 2022, which removed a major gas supplier from European markets, drove European LNG import demand sharply higher, and contributed to a global gas price spike that hurt developing nations disproportionately.

Before the Iran war, analysts expected global LNG supply to rise as much as 10 percent in 2026 — to between 460 million and 484 million metric tons — as new capacity from the U.S. and Qatar came online, per Reuters. That projection is now obsolete. The combination of physical damage to Qatari infrastructure and the blockade of Hormuz has transformed what was expected to be a supply-surplus year into a supply-deficit one.

The long-term structural damage is the more significant story. Qatar had been investing billions in a North Field expansion designed to make it the world's dominant LNG supplier through the 2030s. Two damaged liquefaction trains and a delayed expansion project mean that the global LNG market will face a structural shortfall for years — potentially forcing energy-importing nations to lock in alternative, more expensive supply arrangements for the rest of the decade.

What Remains Uncertain

Several key variables were unresolved as of March 29:

The full extent of damage to Ras Laffan beyond the two LNG trains and gas-to-liquids unit has not been publicly assessed. Whether the North Field expansion can be completed on a modified timeline depends on whether the war ends and whether the Hormuz corridor reopens.

The Hormuz situation remains fluid. Iran agreed on March 28 to allow 20 Pakistani-flagged vessels through the strait — a diplomatic gesture — but normal commercial traffic remains down approximately 90 percent, per Al Jazeera. Whether that number recovers before summer, when air-conditioning demand spikes electricity usage across the Gulf and Asia, is an open question.

Pakistan's four-day work week and India's gas curtailment orders are government responses to a crisis in progress. The long-term economic cost to both countries — in terms of GDP impact, industrial unemployment, and social pressure — has not been authoritatively quantified as of this writing.