The Iran conflict is cutting the long-term role of LNG in Asia

Asia’s imports of liquefied natural gas (LNG) plummeted in March 2026, as the Middle East crisis has effectively shut in 20% of global supply from Qatar and the United Arab Emirates (UAE). Despite a fragile two-week ceasefire between the United States (US) and Iran announced on 7 April, negotiations for a longer-term truce failed on 12 April, causing oil and gas prices to jump once again. The Strait of Hormuz remains closed, and it is unclear whether the passage will ever return to normal as a free waterway.

Even once the conflict is fully resolved, oil and gas facilities in the Persian Gulf will take several months to resume normal operations, and 17% of Qatar’s LNG export capacity will be offline for up to five years. Spot market LNG prices in Asia have doubled since hostilities began and are widely projected to remain elevated through 2027.

For many Asian economies, the Iran conflict has already done lasting damage to LNG’s reputation as a viable “transition fuel” from coal to clean energy. Governments are enacting short-term emergency measures to cushion the impact of supply disruptions and price spikes. These responses are likely to reduce the region’s imports in the coming months and may lead to longer-term LNG demand destruction. Alongside efforts to reduce energy demand and stabilize prices, several countries are reverting to coal, expanding nuclear capacity, or fast-tracking the deployment of battery storage and renewable technologies like wind and solar. Some are already canceling LNG projects.

National responses vary, but one lesson is clear: just four years after the 2022 global energy crisis, geopolitical disruptions are once again undermining the case for LNG as an affordable, secure energy source for Asian countries.

The Ides of March: Supply disruptions force Asia to reduce LNG imports

Asia purchased 20.4 million tonnes (Mt) of LNG in March 2026, according to Kpler data, down from a monthly average of 22.1 Mt throughout 2025.

Monthly figures mask lower imports toward the end of March. In the week ending 29 March, Asia recorded its lowest weekly import volumes since October 2023. Imports from Qatar were below 2 Mt in March — reflecting cargoes in transit before the conflict began — but fell to zero in the final week of the month. On a 30-day rolling average basis, shipments to Asia in mid-April reportedly fell to their lowest level since June 2020.

The largest reduction in imports came from China, which imported 3.8 Mt in March, down by 21% year-on-year.

Prior to the conflict, many analysts expected demand from China, the world’s largest LNG importer, to rebound in 2026 after falling by 15% in 2025. However, imports in February were at their lowest level since 2018 and declined further in March. Imports in the first quarter fell by 7% compared to already low levels in 2025. In April 2026, China’s 30-day rolling average of LNG imports fell to their lowest level since 2018.

Based on seasonal buying patterns in recent years, the Institute for Energy Economics and Financial Analysis (IEEFA) expects China’s annual imports to decline again in 2026 to 59 million tonnes — an 11% drop.

Already, China’s state-owned oil and gas company Sinopec has canceled a planned expansion of an LNG import terminal, reallocating funds to domestic natural gas production. Over the last five years, the country’s rapid buildout of renewable energy, an emphasis on domestic natural gas and coal production, and a fraught bilateral relationship with the US have fundamentally changed its LNG procurement approach. While imports grew rapidly during the 2010s, they have oscillated in recent years due to high LNG prices and the availability of cheaper alternatives.

India imported 1.6 Mt of LNG in March, down by 20% year-on-year. The country’s LNG sector is among the most exposed in Asia to the Iran conflict, due to its reliance on Qatar and the UAE for nearly 60% of its supply. While imports from both countries fell to zero by the end of March, India’s shipments from the US, Oman, and Nigeria increased during the month to make up some of the shortfall.

Neither China nor India relies on gas or LNG for a significant share of its power generation. In China, the share of gas in the electricity mix has remained at 3% over the last decade, while in India it has declined to below 1.5%.

India has instead turned to coal to mitigate power supply risks, while accelerating the commissioning of new wind and battery storage projects. While meeting peak electricity demand in the upcoming summer will remain a challenge amid the Iran conflict, the power sector in both countries has remained relatively insulated from LNG price shocks.

Similar to China, India’s LNG imports have wavered in recent years due to high prices. The country’s annual purchases fell by 6.4% in 2025. In both countries, LNG imports in 2025 were lower than in 2020.

Pakistan has not imported any LNG since 3 March, causing monthly purchases to fall to their lowest level since January 2016 (less than a year after the country first started importing LNG). The Pakistani economy has been devastated by the conflict due to its heavy reliance on Persian Gulf suppliers for LNG, oil, and other commodities.

According to the country’s energy minister, the rapid growth of solar has provided a buffer against even more severe impacts. Following the 2022 energy crisis, Pakistan announced it would not build any new LNG-fired power plants. Between 2022 and the end of 2025, the country imported over 46 gigawatts (GW) of solar panels. Solar energy now accounts for a 25% share of Pakistan’s generation mix, reportedly saving the country USD12 billion in oil and gas imports between 2021 and February 2026, with an additional USD6.3 billion savings estimated by the end of the year.

South Korea, the world’s third-largest LNG buyer, reduced imports by 7% year-on-year in March. The country has taken several emergency measures to minimize LNG imports following the Iran conflict, including restarting six nuclear reactors with a combined capacity of 4.75GW by May. Two of these have already resumed operations. The government also aims to fast-track the commissioning of over 7GW of renewable energy this year, along with 1.3GW of battery storage technologies.

IEEFA estimates that these measures, if implemented, could potentially replace up to 6 Mt of LNG demand per year, avoiding nearly USD6.6 billion in import costs.

Other Asian markets, including Japan, Taiwan, and Bangladesh, are also aiming to bring nuclear plants online. After going nuclear-free in 2025, Taiwan has said it will restart two plants with a combined capacity of 3.84GW. Restarts could take up to two years, but the reversion to nuclear demonstrates clearly how LNG volatility can complicate energy plans in Asia and cause longer-term demand destruction.

An LNG reckoning in Southeast Asia

LNG importers in Southeast Asia are also showing clear signs of long-term LNG demand destruction. The Philippines announced it would accelerate the commissioning of 22 renewable energy projects with a combined capacity of 1.47GW to mitigate energy shortages resulting from the Iran conflict, while ramping down LNG imports. At the end of 2025, two major LNG-to-power projects were canceled due to difficulties securing offtake agreements. Additionally, officials said last year that the country was unlikely to add new LNG import capacity in the near term. Thailand and Cambodia have also announced new incentives for the adoption of renewables.

Vietnam’s Vingroup recently requested government approval to replace a planned 4.8GW LNG-to-power project with a portfolio of solar, wind, and batteries, citing unaffordable fuel prices. According to the developer, the Hai Phong LNG project would have required 5 million tonnes per annum (MTPA) of LNG at a cost of USD3.5–3.8 billion. At recent LNG prices of USD21 per million British thermal units (MMBtu), however, annual fuel costs would likely exceed USD5.4 billion, according to IEEFA estimates.

The cancellation is significant both as a direct sign of long-term LNG demand destruction caused by the Middle East crisis, along with two other reasons.

First, Vingroup highlighted that such a sizable annual fuel import bill would “create significant pressure on the economy's foreign exchange needs.” As of December 2025, Vietnam held USD83.6 billion in US dollar reserves, meaning that the company’s fuel costs would require between 4–6% of the country’s foreign exchange reserves for a single project.

According to Global Energy Monitor, Vietnam has 27 other proposed LNG-to-power projects with a total capacity exceeding 54GW. Given the volatility of global gas markets, the country’s LNG ambitions present a significant risk to its ability to import other key goods, service US dollar-denominated debt, and protect the economy against global shocks. Consequently, the government does not currently provide guarantees for foreign exchange convertibility. This presents a major obstacle for the financing of new LNG projects, as lenders and investors require cash flow certainty over periods of up to 25 years.

Second, Vingroup had selected GE Vernova as the turbine supplier for the project just two weeks before announcing its cancellation, demonstrating that LNG projects in Vietnam remain vulnerable even after reaching significant milestones. In October 2025, an IEEFA report found that many LNG-to-power projects in Southeast Asia have not secured gas turbines amid an ongoing global shortage. Wood Mackenzie recently estimated that lead times for turbines are now around six years, while costs for new combined cycle gas plants have skyrocketed.

Vingroup’s project cancellation clearly shows that fuel price volatility and the lack of key contractual arrangements will continue to constrain demand even if turbine agreements are reached.

Concerns from the global gas industry

The global gas industry is also becoming increasingly concerned that price volatility and supply unreliability are hindering demand growth, as reflected in statements from industry executives: 

• At the end of March, a Shell representative said, “These geopolitical shocks...send the wrong signals to customers around the long-term fundamentals of gas.”
• A partner at private equity firm Kimmeridge stated, “The volatility in price is probably the biggest risk for industry.”
• According to a spokesperson from US LNG developer Excelerate Energy, “If we end up more weeks or months in — we are already cutting bone — we will be cutting really deep bone. We need LNG to be dependable in order for [governments] to depend on it and not end up in demand destruction.”
• A recent S&P Global note summarized concerns at CERAWeek, a major oil and gas industry conference held at the end of March: “This latest shock to the global LNG supply could permanently change global consumption to other energy sources to avoid future shocks. In particular, should regional public policies shift away from natural gas and toward coal or renewables, Asia LNG demand growth may not resurge even under sequentially lower natural gas prices.”
• Even before the Middle East crisis began, US LNG exporter Venture Global’s initial public offering prospectus in January 2025 stated, “In addition to natural gas, LNG also competes with other sources of energy, including coal, oil, nuclear, hydroelectric, wind and solar energy… As a result of these and other factors, LNG may not be a competitive source of energy internationally.”

Conclusion

Just one month into the Iran conflict, countries have sought to ensure short-term energy security by relying on existing infrastructure, often coal and nuclear facilities. Renewables, however, could offer the largest opportunity for expanding new infrastructure. Under ideal conditions, solar and onshore wind are the fastest power generation assets to bring online. Utility-scale solar can take six months to one year to construct and commission, while onshore wind can take less than two years.

By comparison, gas-fired power plants may take three to four years to bring online, though turbine shortages are extending development lead times to beyond six years. Meanwhile, new nuclear projects can take more than a decade to complete.

While the growth of renewable energy may not eliminate the need for LNG in Asia, it is likely to push gas-fired power plants into smaller peaking roles, reducing both the volumes required and the predictability of demand.

Countries like Pakistan and Vietnam have demonstrated the speed at which emerging Asian economies can deploy renewable energy and limit gas demand growth. As a result of global gas market disruptions and price volatility over the past four years, countries around the region are starting to follow suit.