The International Energy Agency (IEA) forecasts global natural gas demand to fall 0.5% in 2026, or about 20 billion cubic metres, marking the third annual decline this decade after decreases in 2020 and 2022, according to the IEA's third-quarter 2026 Gas Market Report. The decline is mainly due to higher prices curbing demand from power generators and industry after the U.S.-Iran conflict tightened supplies.
Supply disruptions from the Strait of Hormuz
The U.S.-Iran conflict has sharply reduced liquefied natural gas flows through the Strait of Hormuz, a shipping route that typically carries about 20% of global LNG supplies. According to the IEA, global LNG supply for the full year is expected to be broadly unchanged from 2025 as increased production in other regions offsets disruptions in the Gulf. However, if the Strait is not fully reopened before the start of the fourth quarter, global LNG supply could record its first annual decline since 2012, the report said.
LNG supply from Qatar and the United Arab Emirates has fallen sharply, with output down almost 80% in the March-June period compared with the same four months in 2025, according to the IEA.
Price surge curbs demand
Europe's benchmark TTF price and Asia's Platts JKM benchmark both recorded their highest average second-quarter prices since 2022. The IEA reported that TTF rose 32% year-on-year to average nearly $16 per million British thermal units, while spot LNG prices in Asia increased 45% to an average of $17.5/mmBtu.
| Benchmark | Q2 2026 Average | YoY Change |
|---|---|---|
| TTF (Europe) | ~$16/mmBtu | +32% |
| Platts JKM (Asia) | ~$17.5/mmBtu | +45% |
Asia leads demand decline
Gas demand in Asia fell around 1% year-on-year in the first half of 2026 as higher prices encouraged fuel switching, particularly to coal in the power sector, according to the IEA. This contributed to the overall global demand decline.
Outlook
If the Strait of Hormuz remains closed into the fourth quarter, global LNG supply could shrink for the first time since 2012, potentially tightening the market further. The IEA's next update will be closely watched by traders and procurement teams tracking natural gas benchmarks and supply risks from the Gulf region.
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