Hormuz LPG Squeeze Pushes US Gulf Coast Propane 25% Above Pre-War Levels
Iranian attacks shutting the strait have rerouted LPG flows and driven prices sharply higher, exposing importers across Asia, Europe and South America.
Texas Gulf Coast propane had climbed roughly 25% above February pre-war prices by mid-June (2026-06-17), as Iranian attacks on vessels in the Strait of Hormuz kept the world's busiest hydrocarbon choke point effectively sealed, oilprice.com reported on Wednesday (2026-08-05). The price move followed a drop in vessel traffic through the strait to an average of just 11 ships per day by late May (2026-05-31), compared with the pre-war baseline.7
LPG has attracted less attention than crude or LNG during the Hormuz crisis. That is a significant oversight. Four countries supply approximately 60% of global LPG output, and virtually every major importing region — Asia, Europe, most of South America and several African nations — depends on seaborne cargoes moving through that corridor, oilprice.com said.7
The disruption was swift. During the height of the conflict in early March (2026-03), Texas Gulf Coast propane surged nearly 10% as supply chains scrambled to adjust to the closure. The squeeze deepened through the spring, with the 25% premium over February levels hardening by mid-June (2026-06-17).7
The US has moved aggressively to fill the gap left by shuttered Middle Eastern producers. According to Kpler data cited by OGJ, US crude exports reached 5.15 million barrels per day in April (2026-04), up 1.22 million b/d from March, as buyers in Asia and Europe sought barrels outside the Gulf. Gulf Coast refiners benefited from stronger exports of diesel, jet fuel, and LPG in the same period.1 Middle East production shut-ins reached 10.5 million b/d in April and were expected to peak near 10.8 million b/d in May (2026-05), OGJ forecasts showed.1
But US production growth has limits. OGJ forecast domestic crude output at 13.65 million b/d for 2026, a 0.5% increase from 2025. Extra barrels redirect easily via tanker; LPG supply chains are less flexible, given the specialised vessels and receiving terminals required. Replacing Gulf LPG flows into South and East Asia is a different logistical problem from replacing crude.1
The longer-term demand picture for LPG continues to point upward regardless of the disruption. Propane volumes globally are increasing to over 213 million metric tonnes in 2026 and are projected to reach 260 million mt by 2031, oilprice.com reported. The structural driver is substitution: demand for cleaner cooking and heating fuel across South Asia and Africa, where LPG replaces wood, charcoal, or kerosene.7
The LNG corridor through Hormuz faces a parallel squeeze. Shell said in late June (2026-06-30) that the disruption could keep global LNG trade flat in 2026 if flows do not resume, but that volumes could still match 2025 levels if shipping normalises this summer. Analysts told Montel on Wednesday (2026-06-17) that a reopening would lift global LNG supply by nearly 2% this year, versus just over 1% without near-term Middle East flows. Charles Costerousse, senior LNG market analyst at Kpler, put the potential additional volume at 3.1 million tonnes, bringing the year's total to approximately 435.3 million tonnes in that scenario.2,5,3
Asian LNG demand is forecast to decline for a second consecutive year as elevated spot prices suppress buying, particularly across South Asia, according to worldpipelines.com reporting from July (2026-07-14). Taiwan is expected to replace more than 75% of any LNG shortfall through spot purchases, a high ratio relative to peers reflecting both necessity and financial capacity. South Asian buyers face starker choices: switch to coal, lean on domestic gas, or absorb higher import costs.6 JKM, the Asian LNG benchmark, traded at $20.91 per MMBtu on August 6 (2026-08-06).
Shell's annual LNG outlook, published in late June (2026-06-30), projected global LNG demand rising 65% to nearly 700 million tonnes per year by 2050, driven by Asia's coal displacement and surging power demand from data centres. Emerging Asian economies are expected to need around 300 million tonnes of LNG annually by 2050 as domestic production falls short. Around 180 million tonnes of new annual LNG supply is forecast to enter the market by 2030, Shell said.4,3
The risk for LPG is that extended closure does not merely elevate prices — it reshapes trade flows permanently. South Asian buyers already turning to US cargoes, spot coal, or domestic alternatives are building procurement infrastructure and political tolerance for non-Gulf supply. If the strait remains closed through the third quarter, those substitution patterns could harden in ways that persist well after Gulf LPG returns to market, with the 260 million mt demand projection for 2031 spread differently across origins than the pre-war baseline assumed.7,2