European gas prices surge as LNG supply crisis forces Asia back to coal

The prolonged disruption to shipping through the Strait of Hormuz and lasting damage to Qatari LNG infrastructure have pushed the global energy market into a structural supply crisis, forcing major importers across Asia to revert to coal and oil while European gas prices hover near four-month highs.

The Hormuz Chokepoint and Qatar's Shattered Exports

Shell ↗ 1.58%, the world's largest LNG trader, said in its annual LNG Outlook published June 30 that global LNG trade could be flat in 2026 — ending more than a decade of consecutive growth — if shipping through the Strait of Hormuz returns to normal this summer. The crisis traces back to Iranian missile strikes on Qatar's Ras Laffan Industrial City in March, which QatarEnergy said wiped out 17% of the country's LNG export capacity and forced the company to declare force majeure on long-term contracts for up to five years. The damage took roughly 12.8 million tonnes of annual LNG production offline and caused an estimated $20 billion in annual revenue losses, according to QatarEnergy CEO Saad al-Kaabi.reuters.com+3

The situation has been compounded by continued hostilities. In early July, the U.S. launched new strikes on Iran and revoked an oil-sales license after three tankers were hit in the Strait, with the Joint Maritime Information Center raising the threat level to "severe".Reuters+1

Asia Turns Back to Coal

The supply squeeze has hit Asian importers hardest. Net LNG flows to Asia dropped below 6 million tonnes on a 30-day moving average in April, the lowest since June 2020, according to data compiled by Bloomberg. Pakistan saw LNG shipments virtually cease after Qatar's force majeure, with only two of eight scheduled March cargoes delivered. South Korea's coal imports surged 27% year-on-year in April as buyers sought alternatives, marking the largest two-month coal import volume in three years. Japan and South Korea both ramped up coal-fired generation in April and May, Reuters reported.aljazeera+3

The South Korean government formally increased the share of coal and nuclear power in its electricity mix to reduce LNG dependence. Bangladesh, the Philippines, Thailand, and Vietnam have similarly boosted coal-fired output.reuters.com+3

European Prices and Refining Strain

European benchmark gas prices rose to nearly €60/MWh by late July, up more than 42% over the past month and 80% above year-ago levels. EU gas storage stood at roughly 51-54% of capacity in early-to-mid July, well below the approximately 54% seen a year earlier and about 14 percentage points under the five-year average. The European Commission's Gas Coordination Group said June 30 that reaching 80% storage by winter remained feasible but acknowledged levels were below pre-crisis norms.TRADING ECONOMICS+3

Rystad Energy warned that the disruption extends beyond crude oil markets. In an April analysis, the firm noted that European refiners needed 260,000 barrels per day of additional throughput while operators were cutting runs instead, with physical market differentials adding $35-45 per barrel over screen prices. Rystad's May oil market report projected refinery run cuts across Asia, the Middle East, and Russia as trade flows adapted to the blocked strait. The firm's broader 2026 outlook flagged that global refinery capacity growth has lagged product demand growth since 2023, with tight refined product markets pushing crack spreads to elevated levels.Rystad Energy+2

The crisis underscores how a single chokepoint can reshape global energy flows. As Shell noted, LNG demand recovery depends on when — and whether — Hormuz shipping returns to normal.Shell Global