Wood Mackenzie said South Asian LNG demand is set to fall by about 6 million tonnes in 2026 after conflict in the Middle East disrupted supplies, reversing an earlier forecast for 2.7 million tonnes of growth.
The disruption centred on the closure of the Strait of Hormuz, which cut off LNG flows from Qatar and the UAE to a region that had become heavily reliant on those suppliers. In 2025, nearly 90% of Qatari and UAE LNG shipments through the strait went to Asia, leaving South Asia exposed when supplies were interrupted and spot prices rose sharply above contracted levels.
The price shock and supply squeeze reduced gas demand by more than 3 million tonnes in Bangladesh and by about 1.5 million tonnes each in India and Pakistan. Governments across the region responded with gas rationing, power cuts, tariff increases and extra budget support, while industrial users and households absorbed the effects of tighter supply and higher costs.
Pakistan was the hardest-hit market. In 2025, 99% of the country's LNG imports came from Qatar, and the strait closure cut Pakistan-bound LNG by as much as 0.4 million tonnes a month from March to November 2026.
To manage the shock, Pakistan curbed demand, switched fuels and released withheld domestic gas, leading to more than 2.5 million tonnes of gas demand destruction. The country returned to the spot LNG market in April 2026 after a two-year absence, but high prices limited its room to manoeuvre. It also remained exposed to daily charges on its floating storage and regasification units under take-or-pay terms even when no cargoes arrived.
Wood Mackenzie has cut its 2027 LNG demand forecast for Pakistan to 3.7 million tonnes, from 6.6 million tonnes in 2025. Committed LNG volumes are expected to exceed demand through 2030, while uncontracted volumes are projected to rise above 90% in the early 2030s.
Bangladesh also came under pressure because it lacked both higher domestic production and a broader import base. Gas shortages led to prolonged power outages and increased coal use as the government sought alternative energy sources.
Petrobangla bought spot cargoes from Gunvor and Vitol for March delivery at USD $23-28 per mmbtu, according to the analysis. Between March and June 2026, Bangladesh paid more than USD $18 per mmbtu on average for spot LNG, adding to pressure on state subsidies.
India was less severely affected because it used a tiered demand-management approach. City gas distribution was left untouched, while supplies to the fertiliser, refinery and industrial sectors were reduced in March and April.
Daily urea production increased by 12,000 to 15,000 tonnes and reached record highs in May and June, supported by government subsidies. India's LNG tender prices ranged from USD $16.8 to USD $18.8 per mmbtu between March and June 2026 before rising to USD $26.4 per mmbtu by September, though tender demand remained firm.
Structural risks
The findings raise broader questions about how emerging Asian gas markets manage supply security when a large share of imports is tied to one route and a small group of producers. Countries with broader supply options and different pricing structures coped better with the disruption than those that relied mainly on long-established Gulf flows.
"The Middle East conflict has exposed the structural vulnerabilities of South Asian LNG markets in stark terms," said Johnson Quadros, Head of Gas and LNG Research, Wood Mackenzie.
"Countries that had diversified their supply sources and established multiple pricing mechanisms came through this crisis in far better shape than those that had not," Quadros said.
Wood Mackenzie said the duration of the conflict remains the central uncertainty. If hostilities continue, governments may be forced to choose between protecting public finances and maintaining energy security as current emergency measures become harder to sustain.
The group said the current supply shock sits uneasily alongside longer-term expectations of LNG demand growth in Asia. That mismatch creates uncertainty for both buyers and sellers as they weigh future contracting, infrastructure and exposure to the spot market.
"Affordable LNG is essential to drive the 60% demand growth we expect through 2040, and South and Southeast Asian economies are central to that trajectory," Quadros said.
"The disconnect between today's supply crisis and tomorrow's risk of oversupply creates real uncertainty for both buyers and sellers. Buyers that do not act on the lessons of 2026 on diversification, flexible pricing, infrastructure resilience and building trading capabilities risk facing the same vulnerabilities again in a market that will be even larger and more interconnected," Quadros said.