IEA forecasts global gas demand will fall for first time since 2022

Global natural gas consumption will fall 0.5% this year — a decline of roughly 20 billion cubic metres — as elevated prices driven by the U.S.-Iran conflict squeeze demand from power generators and industrial users, the International Energy Agency said on Tuesday in its Q3 2026 Gas Market Report.investing+1

The contraction marks the third annual decline in global gas demand this decade, following drops in 2020 and 2022. It represents a sharp reversal from the IEA's earlier outlook, which as recently as January projected demand growth of nearly 2% for the year amid an expanding wave of new LNG supply.iea.core.windows+2

Prices Surge, Asia Switches to Coal

Europe's benchmark TTF price averaged nearly $16 per million British thermal units in the second quarter, up 32% year-on-year, while Asia's Platts JKM spot LNG benchmark climbed 45% to $17.5/mmBtu — both their highest quarterly averages since 2022. The price spike has had its most pronounced effect in Asia, where gas demand fell around 1% in the first half of 2026 as buyers pivoted back to coal in the power sector.iea+1

The Middle East itself has also seen consumption fall, with damage to gas-intensive industries compounding supply constraints in the region.iea

Strait of Hormuz Chokes LNG Flows

The conflict has sharply curtailed shipments through the Strait of Hormuz, a corridor that normally carries about 20% of global LNG trade. LNG output from Qatar and the United Arab Emirates plunged nearly 80% between March and June compared with a year earlier.investing

Yet the global LNG market has shown resilience. Exports from North America surged 45% year-on-year in June on the back of new capacity at Plaquemines LNG, Golden Pass, Corpus Christi Stage 3, and LNG Canada, while legacy producers in Australia, Malaysia, and Nigeria also boosted output. As a result, global LNG supply is expected to remain broadly flat for the full year.globallnghub+1

The IEA warned, however, that if the strait is not fully reopened before the fourth quarter, global LNG supply could record its first annual contraction since 2012. Shell ↗ 2.25% reached a similar conclusion in its annual LNG Outlook released last week, projecting flat trade if the waterway reopens over the summer but a rare decline if disruptions persist.bloomberg+3