Liquefied natural gas demand across South Asia is projected to drop by roughly 6 million tonnes in 2026, a sharp reversal from earlier expectations of 2.7 million tonnes of growth, according to new analysis from Wood Mackenzie. The Middle East conflict and resulting closure of the Strait of Hormuz severed Qatari and UAE LNG shipments to a region that had grown critically reliant on them, triggering what the energy research firm characterizes as one of the most severe supply shocks in global gas trade history. The outlook for LNG demand beyond 2026 has also been substantially downgraded.
Pakistan suffered the most dramatic impact, with 99% of its 2025 LNG imports coming from Qatar, while Bangladesh sourced over 70% from the same supplier. The Strait closure cut Pakistan-bound LNG volumes by up to 0.4 million tonnes monthly from March through November 2026, forcing demand curtailment, fuel switching, and release of previously withheld domestic gas that together destroyed more than 2.5 million tonnes of gas demand. Bangladesh faced gas shortages that caused extended power outages and pushed the country toward greater coal use, while spot LNG purchases between March and June 2026 consistently exceeded $18 per million British thermal units. India reduced gas consumption by approximately 1.5 million tonnes but fared comparatively better by cutting supply to fertiliser, refinery, and industrial users while protecting city gas distribution. In 2025, nearly 90% of Qatari and UAE LNG moving through the Strait was headed to Asia, making the region the primary victim of the disruption.
"The Middle East conflict has exposed the structural vulnerabilities of South Asian LNG markets in stark terms," said Johnson Quadros, Wood Mackenzie's head of gas and LNG research. Countries with diversified supply sources and multiple pricing mechanisms weathered the crisis far better than those without such protections, the report notes. Wood Mackenzie has slashed its LNG demand forecast for Pakistan to 3.7 million tonnes in 2027, down from 6.6 million tonnes in 2025, and expects committed LNG volumes to surpass demand through 2030. Bangladesh was forced into spot markets under the worst possible conditions, paying Gunvor and Vitol $23 to $28 per million British thermal units for March deliveries, while India's tender prices ranged from $16.80 to $18.80 between March and June before jumping to $26.40 by September.
The supply shock stems from Pakistan and Bangladesh's extreme concentration of LNG sources, which left them with no buffer when the Strait closed and spot prices spiked far above contracted rates. Pakistan re-entered the spot market in April 2026 after a two-year absence but found limited success due to high prices, even as the country remains liable for daily floating storage and regasification unit charges regardless of whether cargoes arrive. Emergency responses across the region have included gas rationing, power cuts, tariff increases, and additional budget allocations, but Wood Mackenzie cautions these measures postpone costs rather than resolve them, stretching governments to fiscal limits while end-users absorb mounting energy bills and disrupted industrial supply chains.
The conflict's duration remains the critical unknown, and if hostilities persist, current policy tools will prove insufficient and force governments to choose between energy security and fiscal stability. Wood Mackenzie expects 60% LNG demand growth through 2040, with South and Southeast Asian economies central to that trajectory, but Quadros warns that "buyers who do not act on the lessons of 2026 on diversification, on flexible pricing, on infrastructure resilience and on building trading capabilities risk facing the same vulnerabilities again, in a market that will be even larger and more interconnected." The disconnect between today's supply crisis and the looming risk of oversupply creates genuine uncertainty for both buyers and sellers in what will be an increasingly interconnected market.