Global demand for natural gas is expected to decline by 0.5 per cent in 2026 as supply disruptions linked to the conflict in the Middle East continue to drive higher prices and weaken consumption, according to the International Energy Agency’s (IEA) latest Gas Market Report.

The projected decline, driven mainly by lower gas use in the power generation and industrial sectors, would mark the third annual contraction in global gas demand in the past seven years.

The report highlights the far-reaching impact of disruptions to liquefied natural gas (LNG) shipments through the Strait of Hormuz, a critical trade route that previously handled around 20 per cent of global LNG supplies.

Although LNG tanker traffic has gradually recovered since the US and Iran reached an interim agreement in mid-June to ease hostilities and reopen the Strait, shipping volumes remain well below pre-conflict levels.

The IEA said uncertainty over future trade flows continues to weigh on global markets, with gas prices in Europe and Asia easing from peaks recorded in March but remaining significantly higher than 2025 levels.

Preliminary data indicates that global gas demand contracted during the first half of 2026 compared with a year earlier.

The sharpest declines were recorded in the Middle East, where tighter supplies and damage to gas-intensive industries reduced consumption.

Demand has also weakened across Asia as higher prices and government policies encouraged greater energy efficiency and fuel switching, particularly from natural gas to coal in the power sector.

On the supply side, LNG production from Qatar and the United Arab Emirates fell by nearly 80 per cent between March and June compared with the same period in 2025.

However, the IEA expects total global LNG supply for 2026 to remain broadly unchanged as increased production from new export projects in North America, Africa and Australia offsets much of the regional shortfall.

The agency warned that if the Strait of Hormuz is not fully reopened before the fourth quarter, global LNG supply could record its first annual decline since 2012.

Longer-term impacts are also expected, as damage to gas infrastructure, including Qatar’s Ras Laffan, the world’s largest LNG liquefaction facility, is likely to delay the country’s planned production expansion.

As a result, global gas markets may remain tighter than previously forecast through 2026 and 2027.

Beyond the energy sector, the IEA said disruptions to natural gas supplies are affecting global fertiliser production, as gas is a key feedstock for fertiliser manufacturing.

The resulting pressure on agricultural supply chains could pose increasing risks to food security, particularly in vulnerable regions, underscoring the broader economic consequences of prolonged instability in global energy markets. -OGN/TradeArabia News Service