Hormuz LNG Outage Reaches 80 Mtpa as Saudi Bypass Route Faces Bab el-Mandeb Threat
The Hormuz closure removed 20% of global LNG supply while Saudi Arabia's alternate export route faces a second chokepoint, testing buyer diversification across Asian markets.
JKM spot held at $24.81/MMBtu on Friday (2026-09-11), flat on the day, while markets continued absorbing the scale of a supply disruption that Wood Mackenzie estimates removed approximately 80 million tonnes per annum of LNG from world markets — equal to 20% of worldwide output.2
Before the Hormuz closure, around 20% of the world's oil and gas moved through the strait, according to oilprice.com. Asia, which absorbs nearly 90% of all LNG shipped by Qatar and the UAE, faces direct exposure to supply loss and price volatility, Wood Mackenzie said. Europe imports 7-11% of its LNG from the Middle East and carries a separate but growing exposure through declining storage levels.4,2
Iranian missile and drone strikes in spring 2026 extended the damage beyond shipping lanes. Hits on Ras Laffan LNG Trains 4 and 6, and on Pearl GTL Train 2, have sidelined roughly 12.8 million tonnes per year of LNG capacity for an undisclosed repair period, QatarEnergy said. S&P Global estimated the broader production impact at a 15 million barrels per day reduction in Gulf liquids output.4,3
Saudi Arabia moved to offset the Hormuz closure through its Red Sea infrastructure, with Aramco planning to route more than 5 million barrels per day through alternate terminals, India Seatrade News reported in late May (2026-05-21). But the subsequent effective closure of the Strait of Bab el-Mandeb, which normally handles about 7% of global oil output, placed that bypass under fresh pressure, oilprice.com reported in late July (2026-07-22). Industry estimates suggest every week of Hormuz disruption removes roughly 100 million barrels from global supply; with the Bab el-Mandeb also constrained, there is no clear secondary corridor.1,4
Buyers adapted by diversifying supply and trading harder. LNG transactions through the Physical Asia Platts Market on Close assessment process rose after the disruption took hold, and derivatives trading volumes jumped 251% year-on-year, S&P Global Energy said. India's procurement showed how far that diversification can reach: despite a 17% global LNG supply disruption, Indian imports fell only 5%, with May 2026 volumes holding just 2% below year-ago levels through sourcing from Oman, the United States, Nigeria and Angola, S&P reported.4,3
IEA member countries have released approximately 290 million barrels of a pledged 400-million-barrel emergency drawdown since coordinating action on March 11 (2026-03-11), with further volumes entering markets, the agency said.5
The IEA has warned that the gas supply shock is reviving coal as a generation fuel. Buyers unable to secure replacement LNG cargoes have been turning to coal and oil-fired alternatives, oilprice.com reported in late July (2026-07-22). Newcastle thermal coal held at $140.75 per tonne on Friday (2026-09-11). The effective closures of both Hormuz and Bab el-Mandeb have driven up natural gas prices in Europe and Asia, making coal-fired switching economically competitive for utilities with that capability.4
European gas markets make the storage pressure clearer than Asian spot prices imply. ICE Endex TTF front-month fell 3.31% to €79.51/MWh on Friday (2026-09-11), yet European gas storage sat below 54% full, against 64% at the same point last year, oilprice.com noted. ICIS analysts warned the conflict is delaying the expected recovery of Qatari LNG volumes, widening the storage gap ahead of winter 2026-27.4
Wood Mackenzie modelled three post-closure scenarios and found that global LNG supply growth is likely to return under all three, supported by more than 150 Mtpa of capacity under construction outside the Persian Gulf, led by US projects, with a further 30 Mtpa expected to reach final investment decision. That supply pipeline addresses a structural gap; it does not close the near-term shortfall.2
ICE Brent crude front-month eased 0.92% to $103.81 per barrel on Friday (2026-09-11), and the VIX dropped 11.21% to 15.84, both suggesting the market is moderating near-term escalation assumptions rather than pricing fresh disruption. JKM's flat close fits that tone. Still, QatarEnergy has not disclosed a repair timeline for Ras Laffan Trains 4 and 6, and the Bab el-Mandeb has not been confirmed open. Those two data points will define the pace of LNG supply recovery into winter.6,4