2Q 2026
The following is an excerpt of the Demand section of the Global LNG Outlook.
Five months on from the effective closure of the Strait of Hormuz on February 28, the war that has come to define this year’s LNG market shows no sign of resolving yet into anything so tidy as a “before” and “after”. What briefly looked in mid-June like a ceasefire has since relapsed, and the market is now beginning to price in a conflict that repairs itself just long enough to break again.
That cycle of repair, relapse, repeat is the organizing pattern behind this quarter’s balance, and it has pushed the disruption from that of an acute shock into something closer to entrenching durable risk.
In the near-term, global LNG demand for 2026 now stands at 416.6 MMt, down from 430.6 MMt in 2025 and 5.6 MMt below where the market stood as recently as the first-quarter forecast. It is, from Poten’s figures, the first year-on-year contraction in the global demand forecast in recent memory and a notable one, as LNG supply does not usually fall one year to the next in a market that has spent two decades in more or less uninterrupted expansion.
Of the 5.6 MMt of demand destruction reflected in the forecast, the greater share, about 3.6 MMt, has been absorbed by Asia Pacific markets and the remaining 2 MMt by Atlantic basin markets.
Relapse
What has changed since the ceasefire’s collapse is not merely the duration of the disruption but its geography. Qatar Energy’s force majeure on long-term deliveries, already extended twice, has now been pushed out again, to September 2026. Live shipping data shows the Strait of Hormuz effectively closed to commercial traffic as of July 17, with roughly ten transits recorded against a normal daily baseline of about 88. The International Maritime Organization has logged 52 maritime incidents across the Persian Gulf, the Strait of Hormuz and the Gulf of Oman since the war began, including three confirmed strikes on Qatari LNG tankers this year, the most recent hitting the Al Rekayyat on July 7–8. Tehran has indicated the closure will persist until Washington accepts its terms.
More consequential still is the opening of a second front. The Houthi campaign against shipping in the Red Sea and the Bab el-Mandeb corridor means that LNG cargoes now face disruption at both sides of the Arabian Peninsula. Vessels are being routed around the Cape of Good Hope, adding 10-14 days to a voyage, materially tightening shipping availability and potentially impacting charter rates. War-risk insurance premiums are climbing in step and are beginning to impose a structural floor under LNG shipping costs, an issue that looks unlikely to disappear even if the war resolves.
The market this is producing is a bifurcated one. Namely, buyers with budgetary flexibility, are absorbing premium-priced, uncommitted cargoes at elevated JKM levels, while price-sensitive buyers across South and Southeast Asia and parts of the Middle East itself are absorbing that loss of supply. Of the loss-takers, the majority are buyers most dependent on Qatari and Emirati supply. Pakistan, which was sourcing almost all its term LNG from Qatar, has seen its 2026 import forecast cut by roughly a fifth, to 2.3 MMt, with the country reportedly seeking to defer more than 170 contracted cargoes between 2026 and 2031. India, despite being a resilient medium to long term story, has had its 2026 forecast trimmed by nearly 19%, to 19.6 MMt, reflecting the 59% share of 2025 imports that came from Qatar and Abu Dhabi. Within the Gulf itself, Kuwait and Bahrain have absorbed most of the bulk of the Middle East’s near-term demand drop, as they are geographically inside the sphere of conflict yet cut off from suppliers beyond it. Korea’s 2026 outlook has softened by roughly 1 MMt as utilities lean on coal rather than pay up for gas, and Sub-Saharan Africa’s already modest demand base has shrunk further still, with the near-term forecast revised downward following the further deferral of South Africa’s Richards Bay terminal.
Repair
Two countries complicate the expected pattern in interesting ways. Bangladesh, despite comparable historical exposure to Qatari cargoes, has had its 2026 forecast revised upward, from 2.8 MMt to 5 MMt, having proven adept at replacing lost volume on the spot market. Egypt, by contrast, has seen near-term demand revised up for a wholly different reason. The country’s worsening decline in domestic production is forcing more cargoes in to cover the shortfall, a gap that pipeline supply from Cyprus’s Cronos field, which recently reached a financial investment decision (FID) this year, should eventually narrow. Japan, meanwhile, remains the market most insulated from most of the volatility. With only 5-6% of its historical supply sourced from Qatar and the UAE, its 2026–2046 demand outlook is essentially unchanged this quarter, serving as an interesting guidepost for assessing country and counterparty risk.
Meanwhile, Europe’s forecast has moved in two directions and deserves to be read as two separate stories rather than one. In the near term, the continent has taken a further cut: on top of the roughly 15 MMt reduction applied last quarter for lost Middle Eastern supply, this quarter trims a further 2.4 MMt from the 2026 forecast, to 123 MMt, with a sharp rebound to 140.5 MMt in 2027 on the assumption (which is increasingly dimming, given events since) that Hormuz transits normalize by the start of next year. The more consequential change sits further out. From 2029, Poten has raised its European demand materially: by 2.4 MMt in 2029, 4.1 MMt in 2030, an average of roughly 5.4 MMt/y through 2035 and 6.2 MMt/y through 2040. This represents a supply revision, reflecting the volume of newly sanctioned liquefaction capacity that will need a home. European demand is now projected to peak at 164 MMt/y in 2032, very comfortably above the 128 MMt Europe imported in 2025. With more supply coming into the market, there will likely be second order consequences for TTF’s role as the world’s price-setter of last resort.
Repeat
The most important shift in this quarter’s balance is not the near-term demand loss itself but what has happened to the shape of the recovery. The supply glut the market had been expecting for 2026–2028 is being delayed and diminished as Qatar’s capacity setbacks compound. The North Field East expansion, once expected to anchor an easing of global balances, now slips further to the right as those volumes are delayed. Where the market had expected relief, it is now pricing in tightness that has the potential to persist much longer than pre-crisis models assumed. This will likely only be reinforced by Red Sea disruptions that raise risk, freight and insurance costs globally.
Even as near-term demand is being suppressed by unavailable Gulf supply, the buyers displaced from that supply are not disappearing. Instead, they are locking in volume elsewhere, on longer tenors, with sellers who can offer geographic and geopolitical insulation. The result is a market being reshaped in real time toward term contracting over spot exposure, and toward suppliers seen as structurally distant from Gulf risk. Chiefly, this has been the US Gulf Coast, but increasingly East Africa as well, as a defining criterion in project selection and financing.
A run of recent FIDs, including Commonwealth LNG and Delfin FLNG alongside CP2 Phase 2 earlier in the year, clearly evidenced sellers capitalizing on this shift. So too is the Korean and Canadian government’s participation in LNG Canada Phase 2, which is on track for FID in the third quarter of 2026. Europe’s own hedge against upstream disruption is visible in its accelerating build-out of regasification capacity, with Poland’s first FSRU (and second import terminal) coming online as evidence that import resilience is now being pursued as a hedge against disruption in general, not merely against Russian dependence specifically.
Second order effects
A handful of developments beyond the balance merit attention because they could be early “canaries in the coal mine” for what the second order effects of these events may be. The European Commission was forced to water down its latest sanctions package, to avoid a Greek veto, even as attacks on maritime infrastructure, ports and processing facilities escalated on both sides of the Black Sea. The European Union’s latest dispute offers one of the clearest signals that security of supply is beginning to outrank sanctions integrity when the two come into direct conflict. Greece withheld its support for the Bloc’s 21st package of Russia sanctions over provisions that would have prevented European-controlled vessels from transporting Russian LNG to buyers outside the EU. Although the package was ultimately adopted on July 23, this was only after Greece secured an exemption allowing Russian LNG shipments to non-EU countries to continue under European operators. The outcome is less a reversal of Europe’s Russia policy than an important qualification of it. The commission remains firm on removing Russian gas from the EU’s own supply mix, but it has proved less willing to prohibit European companies from facilitating the same trade elsewhere when alternative operators
could step in. That distinction carries significant political weight. It sets the precedent that sanctions will increasingly be judged by whether member states believe they impose a demonstrable cost on Russia proportionate to the economic burden borne by Europe. Greece’s objection was not that Russia should escape further sanctions, but that Europe should not surrender a strategic shipping business without materially reducing Moscow’s revenues. By accepting that argument, the EU has created a template that other member states may begin to invoke when future sanctions collide with individual economies and industries.
This exposes a potentially broader weakness in the unanimity-based sanctions process and could result in a more fragmented or transactional European sanctions policy, that may be pushed by fragmentation to increasingly narrow the scope of its packages. It also illustrates how thoroughly the Middle East war is now affecting energy decisions well beyond the Gulf. The variable to watch heading into the next quarter is not any single demand figure but in qualifying how repair, this time, holds.
This excerpt is taken from Poten’s Global LNG Outlook. Complete the form below to learn more or request a trial.