The escalating conflict between Israel and Iran raises the prospect of broader regional instability and has turned the spotlight on the key shipping route of the Strait of Hormuz.
All exports of LNG from Qatar, the world’s second largest exporter, and UAE must pass through the strait, with most cargoes heading to India, China, Japan and South Korea. The narrow passage, at the tip of the UAE and Oman, handles around 20% of global LNG trade.
In 2023, Qatar exported about 81 million tonnes of LNG and the UAE exported 4 million tonnes, contributing 21% to global supply, according to Drewry Shipping Consultants.
Any disruption to this key route would create a major supply shock for the global LNG market and spur demand adjustments in Asia and Europe. In February, it was announced that Iran has begun piloting helium extraction.
Phil Kornbluth, of Kornbluth Helium Consulting, said the risk of a ‘black swan event’ that has the potential to disrupt helium supply has gone up considerably due to events in the Middle East, but said it should be put in context.
“Of course, if the situation escalates to the point where LNG (and helium) production in Qatar is disrupted, we will have far bigger things to concerns ourselves with than helium supply,” he said.
The International Energy Agency (IEA) said a supply shock of significant magnitude would cut gas-fired generation in the power sector, and prompt demand savings in public buildings, as well as production curtailments in the gas- and energy-intensive industrial sectors.
Operators will need to be mindful of disruption, as well as budgeting for rising insurance premiums, said the IEA.
Iran has warned the US, UK, and France that their military bases and ships will be targeted in the region if they help block the Iranian missile and drone retaliation for Israel’s attack.
Sanam Vakil, Director of the Middle East and North Africa Programme at Chatham House, said, “For now, Iran is unlikely to target Gulf infrastructure or assets, but should the situation continue to escalate it may resort to broader regional measures.”
Farea Al-Muslimi, who is a research fellow specialising in the Middle East and North Africa at Chatham House, said the situation meant strikes in the Red Sea will likely resume and the ceasefire with the US may unravel.
“And we shouldn’t be surprised if Saudi Arabia and the UAE are dragged back into direct conflict in Yemen,” he added.
Speaking on a UK radio phone-in, BBC World Affairs Editor John Simpson, drawing on years of reporting in the region, called for a measured reaction.
“I was walking past the newsagents this morning, and it was all [about] the ‘war’, but these things are done to sell newspapers … it’s not the Blitz in 1941,” he said.
