- Iran’s recent attack on Israel has escalated the tensions in the Middle East and raised concerns over LNG trade through the Strait of Hormuz (SoH).
- Any further escalation, leading to the closure of the SoH could impact LNG shipping as 21% of the global LNG supply could be affected.
Maritime research consultancy Drewry says a closure of the Strait of Hormuz could impact LNG shipping.
Closure of the Strait of Hormuz could impact LNG shipping
In an analysis published on its Market Opinion page, Drewry said Iran’s recent attack on Israel has escalated the tensions in the Middle East and raised concerns over LNG trade through the SoH, ‘a key and only feasible passage for Qatar and the UAE to export LNG.’
A closure of the SoH, Drewry said, could affect over one fifth of the global LNG supply, as it is used by two of the world’s key LNG exporters: Qatar and the UAE.
‘In 2023, Qatar exported about 81 million tonnes of LNG and the UAE exported 4 million tonnes, contributing 21% to the global supply. Any supply blockage will not only hurt exporters of these two countries but will also compel key importers to scout for new sources,’ said Drewry. ‘Between Asia and Europe, the former will have a much greater impact as 70% of Qatar’s volumes are exported to Asia while 20% to Europe.’
Some countries, such as India and China, noted Drewry, ‘will be at high risk’ as these countries source about 45% and 25% of their total LNG imports from Qatar every year, respectively.
European importers, including the UK, Italy and Belgium, would also need to source LNG from other countries if supply from Qatar becomes impassable.
Nevertheless, the maritime consultancy said it beleives a complete closure of the Strait is ‘highly unlikely’ as Iran exports all of its oil and LPG cargoes through it and other Middle Eastern countries traversing via SoH will have severe repercussions if it is blocked.
In the analysis, Drewry drew up three scenarios for the possible closure of SoH: No closure, the likelihood of which it says is 75%; Partial/sudden closure (25% likelihood); and Long-term (1-yr)/complete closure (5% likelihood).
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Source: Drewry
