Asian LNG Prices Expected to Increase Amid US Threat to Strait of Hormuz

Global LNG Prices Set to Rise Amid US Blockade of Strait of Hormuz

The US has announced plans to blockade the Strait of Hormuz, a key waterway for global liquefied natural gas (LNG) shipments, following the failure of Washington and Tehran to reach an agreement in peace talks over the weekend. The move is set to impact Asian spot LNG prices, which are already under pressure due to the ongoing conflict in the region.

According to the US Central Command, US forces will begin implementing a blockade of all maritime traffic entering and leaving Iranian ports on Monday at 10 a.m. New York time. However, the blockade will not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports.

The failure of the peace talks raises concerns that LNG supply through the strait, which carried about a fifth of the world's supply of the fuel before the war started at the end of February, will be hampered for longer. As a result, oil and European natural gas surged in Asian trading on Monday.

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| Comparison of LNG Prices (British thermal units) | | --- | --- | | Pre-war high | $25 million | | Post-war high | $25 million | | Current price (after peace talks optimism) | $17 million |

Traders will be closely monitoring how aggressive China, the world's top LNG buyer last year, refills its storage, and whether it needs to pull shipments away from Europe to do so. To ensure sufficient supply, State-owned oil and gas company China National Petroleum Corp. has started injections into major underground storage sites across the west of the nation this month.

LNG prices have soared since the conflict broke out, although they have retreated from a high near $25 a million British thermal units in the week after the war started. Optimism that the sides could reach a deal after agreeing to a ceasefire pushed prices lower last week, to just above $17.