Natural gas market: LNG trade disruptions and market rebalancing

This blog post is part of a special series based on the April 2026 Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report.

The World Bank Group’s natural gas price index rose by 24 percent in March (m/m), as the closure of the Strait of Hormuz — through which roughly one-fifth of the world’s liquefied natural gas (LNG) normally transits—and lasting damage to Qatar’s LNG infrastructure jolted global markets. Among the index constituents, the Asian LNG benchmark spiked about 94 percent during March; Europe’s benchmark climbed about 59 percent as LNG competition from Asian buyers pulled the price higher. Both benchmarks eased in April, declining by 12 and 9 percent, respectively, and were stable in May. By contrast, the U.S. benchmark, insulated by abundant domestic production and robust inventories, fell 3 percent in March, a further 12 percent in April, before rebounding 9 percent in May.

The sharp price rises after the war in the Middle East underscored the Strait of Hormuz’s central role in global natural gas markets. LNG exports from Qatar and the United Arab Emirates have no alternative shipping route, and liquefaction capacity elsewhere is already close to full use, making lost supply difficult to replace. Most of these cargoes normally go to Asia, with a small but still meaningful share going to Europe. As a result, prices rose most in Asia but also climbed in Europe, because both regions compete for a smaller pool of cargoes. Prices were already trending upward before the conflict, as a cold winter in Europe and the United States boosted heating demand and disrupted U.S. LNG export terminals.

A slowdown in global demand is becoming entrenched, while record North American output acts as the market’s main shock absorber. Global gas consumption rose just 0.8 percent (35 bcm) in 2025 — roughly one-third of the previous year’s increase — amid weak demand in Asia Pacific, Eurasia, and North America. After war broke out in the Middle East, 2026 gas consumption is now expected to remain flat rather than grow. Higher prices are already destroying demand, with declines expected in the Middle East due to weak industrial demand, and in Europe, where renewables and coal are replacing natural gas in the power sector. Meanwhile, new LNG terminals in the United States are expected to push North American output to a record high, partly compensating for Middle Eastern losses from the Hormuz closure, delays to Qatar’s North Field expansion, and lasting infrastructure damage. The buffer is, however, thin, as global production is projected to grow only moderately.

Prices are set to climb across the board in 2026 before partly unwinding next year. The U.S. benchmark is projected to rise 8 percent in 2026 and 5 percent in 2027 as LNG exports expand. Europe’s benchmark is expected to surge about 25 percent in 2026 as LNG often sets the marginal price in that market. Disruptions to exports from the Middle East and medium-term damage to infrastructure in Qatar imply greater global competition to refill inventories in Europe and Asia Pacific. However, Europe’s benchmark is expected to fall by around 20 percent in 2027, as disruptions ease. The forecast hinges on one key assumption: that the most acute phase of market disruptions ends imminently, with Middle Eastern LNG exports resuming over the next few months and no further damage to infrastructure. Middle Eastern production is expected to recover in 2027 as the first phase of Qatar’s North Field expansion comes online, even with parts of the Ras Laffan facility likely still offline.

Risks to the natural gas price forecast are tilted to the upside. Longer or wider disruptions in the Middle East remain the clearest threat, as further damage or prolonged trade dislocations would push prices well above the baseline. Low storage levels make the market even more vulnerable. EU inventories ended the winter at the low end of their 2017–21 range, just above the levels seen in early 2022 after Russia’s invasion of Ukraine. As refilling proceeded slowly in May, Europe must inject quickly over the summer, just as countries in Asia Pacific replenish their own storage. AI-driven data centers are adding a structural source of electricity demand, much of which could be met by gas. Finally, the principal downside risk is weaker economic growth in East Asia, whether from China’s property strains or renewed trade tensions, which would soften gas demand and prices.