Morgan Stanley Calls $25 Asian LNG as Middle East War Keeps 12.8 Million Tonnes Offline
JKM benchmark sits at $21.11 per MMBtu while Middle East conflict keeps 12.8 million tonnes offline, widening the gap between U.S. exporters and Asian importers.
The JKM Asian LNG benchmark closed August 9 at $21.11 per MMBtu, with Morgan Stanley forecasting a move to $25 per MMBtu in the third and fourth quarters of 2026 — an upside of more than 30% to the forward curve, according to the bank's analysts in a note carried by Bloomberg.2,3
The gap between current prices and that forecast reflects a supply chain still absorbing the Middle East war's damage. Around 12.8 million tonnes of annual LNG supply could remain offline for three to five years, according to industry analysts, and global consultancies have cut overall supply projections by up to 35 million tonnes since the conflict began.1
Before the war, analysts had expected LNG supply to grow strongly through 2026. That assumption, built on Qatar's stability and open passage through the Strait of Hormuz, collapsed with the conflict. Shell offered conditional reassurance in a note published July 1 (2026-07-01): if Hormuz shipping normalizes this summer, LNG traded volumes could still match last year's despite the disruption, aided by new liquefaction capacity coming online elsewhere. But normalization has not yet arrived.6,4
South Asia has taken the sharpest hit. Before the conflict, India sourced close to 60% of its LNG imports through routes now disrupted by the war, according to senior price reporter Suyash Pande. Buyers in the region turned to coal and fuel oil as substitute fuels, with Newcastle coal physical priced at $116.75 per tonne on August 9.7
Paper markets moved faster than physical ones. LNG derivatives trading volumes jumped 251% year-on-year through July 22 (2026-07-22), Oilprice.com reported, as hedgers and speculators responded to the supply shock. That surge shows how deeply the disruption has altered risk calculations across the buyer base.7
Morgan Stanley's analysts, writing in early June (2026-06-09), warned that Asian utilities are underestimating their fuel-price exposure. Rising temperatures are lifting peak summer demand in Asia at the same time Europe must refill depleted gas storage before winter, leaving less flexible supply for either market. On August 9, the ICE Endex TTF front-month stood at €55.50 per MWh, while THE M+1 traded at €56.02 per MWh, with European buyers competing for the same marginal Atlantic Basin cargoes as Asian importers.2,3
The commercial winners are concentrated in the United States. Cheniere Energy and Venture Global are positioned to capture higher earnings from increased export volumes and elevated LNG pricing on non-contracted volumes, according to analysis published in late April (2026-04-27). Long-term contracts provide baseline revenue; spot and short-term deals struck at current JKM-linked prices flow directly to margins.5
On August 9, the NYMEX Henry Hub front-month stood at $2.66 per MMBtu, roughly one-eighth the price of delivered LNG at current JKM levels. That spread underpins the export economics for U.S. operators and explains why U.S. dominance of global LNG markets has accelerated since the war began.4,8
Shell's July 1 (2026-07-01) assessment leaned toward optimism on Hormuz normalization, crediting new liquefaction capacity with absorbing part of the shortfall. But analysts across the industry expect prices to remain elevated for several years, and 12.8 million tonnes offline for three to five years is not a gap that new export terminals can close quickly. Most of that capacity was already counted in pre-war growth forecasts.6,1
Morgan Stanley noted in June (2026-06-09) that demand was recovering in India and China while Europe's window to rebuild inventories before winter was narrowing. With JKM at $21.11 on August 9 and the bank's $25 target still $3.89 away, the clearest near-term signal will be August shipping data through the Strait of Hormuz. If passage remains constrained, the distance to that forecast closes faster than European utilities, Asian buyers, or spot market traders have priced in.3,6,2