Energy News Beat
The ongoing conflict in the Middle East, including disruptions through the Strait of Hormuz and damage to key Qatari LNG infrastructure, has triggered a sharp global LNG supply crunch. This is forcing buyers in Europe and Asia to pivot aggressively toward coal, oil products (such as fuel oil, naphtha, and propane), and alternative natural gas sources. The crisis has elevated energy security to the top of policymakers’ and industry priorities, prompting a scramble for diversified, geopolitically safer supply lines.
Published on July 22, 2026, the latest analysis from OilPrice.com highlights how the resumption of Iran-related tensions has squeezed LNG flows, particularly affecting Asia (which received ~90% of Middle East LNG shipments pre-crisis). Europe faces mounting winter risks, while second-order effects are rippling through economies—revealing stark contrasts in how nations like Germany and Japan are responding.
Global LNG Squeeze and Fuel Switching
Disruptions since late February 2026 have sidelined significant Qatari capacity (around 12.8 million tonnes per year of LNG for 3–5 years due to strikes on Ras Laffan trains, plus outages at Pearl GTL). Only 26 LNG cargoes left the Gulf in recent months versus the typical 90–100. Global LNG supply growth for 2026 has been slashed from a projected 11% to roughly 1%.
Prices have surged: The Dutch TTF benchmark briefly exceeded €60/MWh, while Asia’s JKM (Japan Korea Marker) climbed toward mid-$25/MMBtu (up from ~$15 earlier). Asian buyers—especially in India, Bangladesh, Taiwan, South Korea, and China—have turned to coal, fuel oil, propane, and naphtha. China’s LNG imports fell 8% year-on-year, South Korea’s by 10%, and Pakistan’s by a staggering 75%.
Europe is not immune. Storage levels sit below 54% full (vs. 64% last year at the same point), well short of the 80–90% winter target. Equinor has warned that prolonged Hormuz disruptions (another 1–3 months) could prevent adequate refill, pushing prices toward €90/MWh and triggering demand destruction, including a potential 10 billion cubic meter drop in gas-to-power use and industrial fuel switching.
Europe’s Challenges: Germany’s Coal Plant Closures vs. Current Pressures
In Europe, the crisis exposes vulnerabilities from earlier policy decisions. Germany, Europe’s largest economy, had shuttered or decommissioned multiple coal units in 2024 after extending some during the 2022 Russian gas crisis. This included seven lignite plants (3.1 GW total) in March 2024 and, notably, the demolition of the advanced Moorburg coal plant in 2025—after just six years of operation—as part of its coal phase-out push.
Now facing renewed gas price spikes and supply uncertainty, Germany is reportedly considering temporarily activating idle hard-coal reserve plants (around 6.7 GW capacity) to stabilize electricity prices and reduce gas demand. Industrial gas consumption has already slumped amid volatility.
Germany has mitigated some risks by ramping up U.S. LNG imports (now ~12% of total gas supply in H1 2026, up from prior years), as Persian Gulf LNG plays a minimal role in its mix. Regulators assess supply risk as low, but high prices continue to pressure industry competitiveness.
These second-order effects—higher electricity costs, potential policy reversals on decarbonization timelines, and short-term emissions increases—underscore the trade-offs when security of supply collides with long-term climate goals.
Japan’s Pragmatic Approach: Reopening and Relaxing Coal Capacity
In stark contrast, Japan has moved quickly to leverage its existing coal fleet amid the same LNG pressures. The government relaxed rules for one year starting April 2026, suspending the 50% capacity factor cap on lower-efficiency coal plants (<42% thermal efficiency). This allows higher utilization to conserve LNG, potentially saving ~500,000 tonnes annually—over 10% of Japan’s Hormuz-routed LNG imports.
Japan’s LNG imports dropped 7% year-on-year in recent quarters, with gas-fired generation falling sharply (e.g., down 16% in June data) while coal-fired output rose (up 4.6% or more in some periods, with broader increases of 11%+ reported earlier). Coal imports have also climbed significantly.
By prioritizing flexible use of mothballed or restricted coal capacity, Japan has experienced relatively fewer acute problems than some peers, maintaining better control over electricity supply and prices despite the global squeeze. This pragmatic, security-first stance highlights how countries with retained fossil flexibility can buffer shocks more effectively.
Energy Security Front and Center: The Hunt for Safe Supply Lines
The crisis has reminded buyers and governments worldwide of supply chain fragility—echoing 2022 dynamics but with new chokepoint risks in the Strait of Hormuz (previously handling ~20% of global oil/gas and a large share of LNG).
Key responses include:
- Diversification away from vulnerable routes: Europe and Asia are accelerating shifts to U.S. LNG (which largely bypasses Hormuz), Norwegian pipeline gas, and other stable suppliers. Germany’s increased U.S. LNG reliance exemplifies this.
- Fuel flexibility and reserves: Coal switching in Asia and potential reactivation in Europe; oil product substitution where viable.
- Infrastructure and contracting shifts: More long-term deals with non-Middle East producers, investments in new LNG capacity outside the Gulf (over 150 mtpa under construction, much in the U.S.), and emphasis on storage/security margins.
- Policy realism: Short-term prioritization of security over pure decarbonization, with Japan explicitly framing coal relaxation as an emergency measure that does not alter long-term goals.
Analysts note that for future contracting, “security of supply [will] jump right to the top of buyers’ and policymakers’ concerns.”
Outlook and Implications
The LNG supply crisis is accelerating a multi-fuel transition in the short term, with coal and oil products gaining ground where gas becomes unreliable or unaffordable. Second-order effects in the EU—potential industrial slowdowns, higher consumer costs, and policy adjustments—are already visible, while Japan’s approach demonstrates that retaining operational flexibility in coal can provide critical breathing room.
As markets stabilize (with some recovery in global LNG liquefaction noted by May 2026), the lasting legacy will likely be a stronger focus on resilient, diversified energy systems less exposed to single chokepoints or geopolitical flashpoints. Energy security is no longer a background concern—it is the defining priority shaping supply strategies for years ahead.
QatarEnergy is preparing to further extend force majeure on liquefied natural gas shipments through mid-October, according to people with knowledge of the matter, in a move that would prolong the supply shock that has disrupted the global gas market amid war in the Middle East.
Several buyers in Europe and Asia said separately they are expecting a formal notification in the coming weeks. Force majeure is declared when extraordinary situations prevent a company from fulfilling its contractual agreements.
Bad energy policies will come home to roost in the EU, UK, Canada and Blue States in the United States. Just saying.
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