Thread by @zerodhamarkets

The IEA just released its Gas Market Report. It's a picture of chaos. Before the West Asian war, the world expected a massive LNG wave. That story is now effectively dead. So what happened, and how long until it recovers? 🧵👇

To understand how wrong things have gone, you need to see how right they were going in. Three years after Russia's invasion of Ukraine sent prices sky-rocketing, the world's gas markets were finally recovering. Supply was catching up. Prices were settling.

New LNG plants were coming online one after another. The US opened a terminal at Plaquemines, Louisiana. LNG Canada began production. America's Corpus Christi facility expanded massively. Nearly half of all new global LNG between October and February came from Plaquemines alone.

This expansion was pulling prices down. By early 2026, European gas traded roughly a quarter cheaper than the year before. Asian prices fell even more. The IEA projected global gas demand would grow 2% across 2026. A wave was coming.

Qatar alone was set to add 70 billion cubic metres of new capacity. India was one of the buyers waiting. Indian industry had been switching away from gas to naphtha, fuel oil, even diesel, because gas had become too expensive. The drought was nearly over. Then the wave broke.

The Strait of Hormuz effectively closed on March 2. Those 33 kilometres were also the main route for gas exports from Qatar and the UAE, together responsible for roughly a fifth of all LNG sold on the planet. When the strait closed, the floor fell out.

By March, European gas was trading at $18 per million BTU, the highest monthly average since the worst of the Ukraine war. In Asia, spot prices climbed to nearly $21, nearly twice the $11 industrial users were paying under long-term contracts.

Asian buyers scrambled for alternatives. They sourced roughly three times as much LNG from North America in March as a year ago. From West Africa, six times as much. LNG carrier rates roughly tripled in early March, the steepest day-on-day jump on record.

Countries were differently positioned. China's LNG imports fell by one-third. India's by a sixth. Pakistan, which relied on Qatar for nearly all its LNG, saw imports collapse by around 70%. Power plants, fertiliser factories, and industrial estates were suddenly shuttered.

The ceasefire has done little. The strait is still not open. Iran is charging tolls of more than a million dollars per ship. The US has imposed a counter-blockade on Iranian ports. The hot war may have cooled, but the chokehold on global energy has not.

Then came the strike on Ras Laffan, the world's largest LNG terminal. On March 18, Iranian missiles damaged two of its fourteen liquefaction trains. Qatar supplies a sixth of the world's LNG. Almost a fifth of that capacity was destroyed. Repairs will take three to five years.

You can't rush this. The equipment that goes into an LNG plant is enormously specialised. You can't order a replacement gas turbine off the shelf.

Before the war, Qatar had been preparing its largest LNG expansion in history, the North Field East project with 44 billion cubic metres of new capacity a year. Construction is now suspended, the timeline slipped by more than a year. North Field South has no public timeline.

The IEA estimates the war has destroyed around 120 billion cubic metres of LNG supply between 2026 and 2030, roughly 15% of the new LNG the world had been anticipating. Any medium-term energy outlook has simply broken down.

The crisis didn't affect the whole world equally. India sourced nearly 30% of its gas and 60% of its total LNG imports through the Strait. Pakistan imported all its LNG from Qatar alone. Bangladesh imported about 60% via the strait. Europe got less than 3% from there.

India's largest LNG buyers, Petronet and GAIL, get most of their gas through long-term contracts with Qatar. Once that supply was frustrated, the only option was the spot market, where prices were three to four times higher. We couldn't buy our way out.

In early March, the government invoked the Essential Commodities Act of 1955, a law most commonly applied for food shortages, to ration gas. Industrial users saw supply fall by 10 to 30%. Two decades of gas market liberalisation, undone in days.

Others responded differently. Pakistan introduced a four-day work week. Bangladesh cut supplies to fertiliser plants. Japan and Korea lifted restrictions on coal power. Across Asia, gas use in the power sector could drop by 60 to 65 billion cubic metres.

Three years ago, when Russia cut off Europe's gas, rich countries took the hit. They bid up prices and absorbed the shock. This time, the worst has fallen on a different part of the world, where countries can't outbid their way through.

The honest answer to when gas markets return to normal is years. Even if the war ends today, repairs alone will take years. Expansion projects that were coming will be pushed out. Where Europe paid, we have to ration.

We cover this and one more interesting story in today’s edition of The Daily Brief. Read on Substack, watch on YouTube, or listen on Spotify, Apple Podcasts, or wherever you get your podcasts; just search for “The Daily Brief by Zerodha.”