Energy

For decades, liquefied natural gas acted as the global economy’s reliable escape valve during energy crises, keeping factories humming and homes warm.

Now, LNG has become the battlefield itself.

The war in Iran has fractured every node of the regional LNG supply chain. Iranian strikes on Qatar, one of the world’s top LNG producers, have damaged its Ras Laffan facility, knocking out some 17% of its capacity for up to five years, and delayed the country’s massive expansion plans. On Tuesday, QatarEnergy declared force ​majeure ​on some of ⁠its LNG supply ​contracts, including ‌customers ⁠in China, ​South ​Korea, Italy and Belgium.

Meanwhile, shipping through the Strait of Hormuz, which usually carries around a fifth of global LNG, is paralyzed. Buyer confidence in Gulf supply has also been undermined.

Even if the Trump administration and Iran agree to end the war soon, the consequences for the LNG market will be long-lasting—and even more profound than for oil, experts say.

For a glimpse of how much higher energy prices could still soar, look beyond the prices Wall Street analysts normally track for West Texas Intermediate in the U.S. and Brent in Europe.

At the center of the supply squeeze in the Middle East, traders are paying an eye-watering $160 a barrel for the Emirati oil that can dodge the Strait of Hormuz, far above those global benchmarks.

Those sky-high prices, traders say, are a harbinger of where the rest of the market could be heading if the Persian Gulf isn’t reopened soon. That is because Asian customers are scouring the world for similar varieties of crude to keep churning out diesel and jet fuel.

Benchmark oil prices sank after President Trump postponed strikes on Iranian energy infrastructure and said the U.S. had held “productive” talks with Tehran, raising the prospect he might be searching for a way to end the war.