Iran War and AI Boom Drive Global Gas Supply Crunch

Liquefied natural gas, or LNG, is natural gas cooled until it becomes a liquid. This greatly reduces its volume, making large-scale transport possible by specialized ships. LNG matters because gas demand and supply are often separated by oceans. Countries without nearby pipelines can therefore buy gas from distant producers.

The article describes LNG as moving in cargoes, meaning individual shiploads sold to buyers. Qatar, the United States, and other exporters send these cargoes to markets in Asia and Europe. Qatar’s lost exports forced buyers to compete for replacement shipments. The United States increased exports, but strong European demand absorbed much of that additional supply.

This shipping system also makes LNG markets connected across continents. When a major exporter cannot deliver, buyers elsewhere feel the pressure through higher prices and tighter availability. The article says Asia and Europe are now competing for limited cargoes, while coal gives Asian buyers another option.

Asian LNG prices have more than tripled since the start of the year. The Japan-Korea Marker briefly exceeded $33 per million British thermal units, compared with slightly above $9 in January. This sharp increase shows how quickly global gas markets react when supply is removed while buyers still need fuel.

The article estimates that the war between the United States and Israel, and Iran, caused about 60 billion cubic meters of LNG supply losses during the eight months to October. Higher production from the United States and Africa replaced as much as two-thirds of that gap. The remaining shortfall kept prices elevated and intensified competition between regions.

The IEA expects global LNG production to decline 3% this year, including a 6% drop from March through October. The article calls the annual decline the steepest since records began. Tightness is expected to continue next year, especially as energy demand rises.

When Qatar cannot ship LNG, the global market loses supply from one of its top three exporters. Buyers must find replacement cargoes, but available shipments are limited. That imbalance pushes prices higher and makes energy security more uncertain, especially for countries that depend heavily on imported gas.

The article connects Qatar’s force majeure to a steep rise in the Japan-Korea Marker. Prices briefly exceeded $33 per mmBtu, compared with a little more than $9 in January. The United States increased LNG exports, while higher production in the United States and Africa filled much of the lost supply. However, those gains covered only about two-thirds of the gap.

The shortage also creates regional competition. Europe has few alternatives to Qatari LNG, while Asia can use coal. The article says global LNG production may fall 3% this year and gas supplies will remain tight next year. That means continued price pressure and supply concerns.

Europe and Asia normally draw on the same international LNG supply, but the market now has fewer cargoes available. Qatar’s force majeure removed a major exporter, while demand remained strong. This turns regional purchasing into a race, because a cargo bought by one region cannot also supply the other.

The article says the United States boosted LNG exports substantially, largely because Europe demanded more fuel. Europe has few alternatives to Qatari LNG, so it competes aggressively for replacement shipments. Asia has more flexibility because it can switch to coal, and the article says Asian buyers are taking advantage of that option.

Even with this substitution, supply remains tight. The IEA expects global LNG production to decline 3% this year and warns that gas supply will remain constrained next year. Higher prices reflect not only lost Qatari exports, but also the difficulty of balancing competing regional needs.

The article presents several ways to offset Qatar’s missing LNG, but none fully closes the gap. Higher production in the United States and Africa filled as much as two-thirds of the estimated losses. Coal gives Asian buyers another fuel option. Other energy sources, including wind and solar, are less useful for some immediate power needs described in the article.

The United States increased exports, but strong European demand absorbed much of the added supply. Asia responded by using more coal because it has fewer constraints than Europe in switching fuels. The article also says data centers cannot be powered reliably by wind and solar, even with batteries, making natural gas the quickest viable option for that demand.

The result is continued tightness rather than a surplus. The IEA expects LNG production to fall 3% this year and warns the gas crunch could last into next year. New production plans and facility expansions may improve supply, but the article says no glut is currently expected.

Artificial-intelligence data centers are increasing natural-gas demand because they require dependable electricity. The article says wind and solar, even with batteries, cannot reliably power these facilities. Natural gas therefore becomes attractive as a quick and viable way to support the data-center construction boom.

The connection is especially important because Big Tech is prioritizing artificial intelligence as a major future growth engine. As companies build more data centers, their electricity needs rise. The article presents gas as the practical bridge for meeting that demand, rather than relying only on intermittent alternative energy sources.

This new demand arrives during an LNG supply squeeze. Qatar’s exports remain unavailable under force majeure, while global LNG production is expected to decline 3% this year. Shell nevertheless expects liquefied-gas demand to surge 65% between this year and 2050. The article therefore sees strong long-term gas demand, even amid price concerns and supply disruption.

Supply elasticity describes how strongly producers change output when prices or conditions change. Demand elasticity describes how strongly buyers change consumption when prices rise. If demand is inelastic, consumption changes only slightly even after a large price increase. Energy often behaves this way because households, industries, and power systems still need fuel.

The article gives a clear example. Over the first nine months of the year, global gas consumption fell by only 1%, or 35 billion cubic meters, despite a major supply squeeze and sharply higher LNG prices. Production increases in the United States and Africa covered as much as two-thirds of lost supply, but the remaining gap kept the market tight.

That limited demand response supports the article’s optimistic long-term outlook for gas and LNG. High prices may reduce consumption somewhat, but the effect could be limited and temporary. The article also notes that cheaper coal can gain market share, especially in Asia, while AI data-center demand adds pressure.