As the Gulf crisis unfolds, oil may dominate the spotlight, but LNG deserves equal attention. Recent events have exposed vulnerabilities in the LNG market at a time when it is expected to become a strategic pillar of global energy security and a cornerstone of the energy transition.
Increasingly viewed as a fuel that offers both security and flexibility while supporting the shift toward cleaner energy, LNG now faces scrutiny over its exposure to geopolitical disruption. This, in turn, may raise broader questions about the resilience of the world’s energy transition strategy.
Growing Flexibility, Yet Enduring Fragility
Over the past several years, LNG’s role in the global energy system has expanded, particularly following Russia’s invasion of Ukraine and the accelerating push toward decarbonisation.
Rising supply from the US, Qatar, and other producers, along with expanded export and import infrastructure and more flexible contracts, has increased buyers’ access. Today, LNG is better positioned than ever to flow to regions where demand is strongest.
Yet the current crisis highlights the limits of these strengths. Supply is highly concentrated: the US, Qatar, and Australia together account for roughly 60% of exports, making the system particularly sensitive to shocks in production. LNG also relies on a complex chain of specialised assets – including liquefaction plants, storage and compression facilities, marine transportation, and regasification terminals. A disruption anywhere in this chain, or bottlenecks at key transit points, can quickly affect global markets.
Straits and Strains
One of the most critical chokepoints is the Strait of Hormuz, a narrow waterway through which roughly one-fifth of global LNG exports pass. Qatar alone accounts for a significant portion of these shipments.
With no viable alternatives, any interruption in the Strait can challenge the reliability of global LNG trade. Regional tensions have already caused temporary pauses and slowdowns in operations, while threats to shipping have brought maritime traffic close to a standstill.
These events directly affect major import markets. In Asia, many economies rely heavily on long-term contracts with Gulf producers, creating potential shortages for established buyers and forcing spot-market importers to compete for limited cargoes. Europe is also particularly exposed. Since 2022, the region’s move away from Russian pipeline gas has made Gulf exporters increasingly central to its energy supply, with Qatar providing more than 10% of imports.
Buffers in Short Supply
Another layer of LNG’s vulnerability lies in its limited storage capacity, which makes the market more exposed to shocks than oil. Oil markets benefit from large inventories and coordinated emergency reserves, providing a substantial buffer.
In 2025, global oil stocks reached 8.2 billion barrels, the highest since 2021. A significant portion is also held as strategic reserves by IEA member countries – the world’s major oil consumers, including the US, EU nations, Japan, South Korea, Canada, and Australia. These reserves, totaling more than 1.2 billion barrels, can be released quickly to stabilise markets if needed.
By contrast, LNG storage is limited, and cargoes cannot be quickly replaced or rerouted. Even minor interruptions can put immediate pressure on supply and pricing, underscoring the system’s constrained ability to absorb shocks.
Maintaining LNG’s Promise
LNG has emerged as a central component of the evolving energy system: cleaner than coal and oil, and flexible enough to support growing renewable systems. In many countries across Europe and parts of Asia, it has enabled the rapid expansion of renewables while reducing reliance on more carbon-intensive fuels.
Yet LNG’s rising importance brings new risks, as the Gulf crisis illustrates. Even small disruptions can affect supply and prices, potentially forcing governments to keep coal plants running, provide emergency energy subsidies, or even slow decarbonisation efforts.
Ensuring reliable supply will require not only new production capacity but also stronger safeguards across the entire system – from export and import terminals to storage facilities and shipping routes.
The Gulf crisis underscores a fundamental challenge: while LNG is intended to provide flexibility and stability in an evolving energy system, maintaining that role will require addressing the structural vulnerabilities built into the market today.
The article was kindly hosted by Petroleum Economist.