Strait of Hormuz Supply Shock: Global Gas Supplies Face Winter Crunch
The IEA warns that a supply shock in the Strait of Hormuz could tighten global LNG supplies during the 2026-27 winter heating season.
The global energy landscape is bracing for a potential crisis as the International Energy Agency (IEA) warns that a Strait of Hormuz supply shock could severely tighten natural gas supplies during the 2026–27 winter heating season. The restriction of trade flows through this critical maritime chokepoint has created unprecedented uncertainty for the liquefied natural gas (LNG) market, threatening stability just as the Northern Hemisphere enters its period of peak demand.
A Massive Drop in Gulf Deliveries
The scale of the disruption is already evident in the data. According to the IEA report, LNG loadings from the United Arab Emirates and Qatar saw a staggering decline of 60 billion cubic metres (bcm) year-on-year between March and October 2026. This collapse in output from the Persian Gulf led to an overall 5 per cent drop—roughly 20 bcm—in global LNG production.
While new projects worldwide have attempted to fill the gap, they have only been able to partially compensate for the loss of these critical Middle Eastern shipments. With transit through the Strait of Hormuz remaining severely restricted as of late October, the IEA cautions that these tight market conditions are likely to persist throughout the winter.
The Struggle to Find Alternatives
The global market is currently struggling to find a viable substitute for the lost Gulf gas. The IEA highlighted several key constraints:
- Pipeline Limitations: The ability to increase pipeline gas supplies is extremely limited, as most long-distance pipelines are already operating near their maximum designed capacity.
- Insufficient New Supply: While North American exporters—specifically from the United States, Canada, and Mexico—are driving growth, and new facilities in Australia and West Africa are coming online, the numbers don't add up.
New LNG projects are expected to add approximately 18 bcm of supply this winter, with existing facilities contributing another 3 bcm. However, the IEA explicitly stated that this total incremental supply of just over 20 bcm is "insufficient to compensate" for the massive volumes lost from Qatar and the UAE.
Two Possible Winter Scenarios
The IEA has outlined two distinct paths for the global gas market depending on when the Strait of Hormuz reopens:
Scenario 1: Progressive Reopening
If the Strait begins to progressively reopen by January 2027, the global LNG supply could see a relatively modest decline of around 9 bcm, or roughly 3 per cent, year-on-year.
Scenario 2: Prolonged Closure
In a more dire situation, if the Strait remains closed until the end of March 2027, the impact would be far more severe. Global LNG supply could plummet by approximately 20 bcm, representing a 7 per cent year-on-year decline during the winter period.
Added Risks on the Horizon
Beyond the geopolitical tension in the Middle East, the IEA warned of further "downside risks" that could exacerbate the shortage. These include unplanned technical outages and potential delays in ramping up production at new LNG plants. Combined with the ongoing disruptions in the Persian Gulf, these factors could push the global energy market into an even tighter squeeze.