Ormuz and LNG. Does the Iran War favour US gas exporters?

The war in Iran and the threat to shipping in the Ormuz Strait again pay attention to security of supply of energy resources. However, in the shadow of the armed conflict, the question raised less frequently in public – whether the long-term destabilisation of the region can indirectly strengthen the position of LNG exporters outside the Persian Gulf.

This is one of the possible hypotheses which, in the present situation in the Middle East, it is difficult to completely ignore.

Conflicts that last for years change the energy market

Yesterday I described the terminal's launch Golden Pass LNG, from which the first transport of liquefied gas (LNG) is expected to emerge soon. At first glance, this is just news from the LNG market, but today it is difficult to look at it in isolation from events in the Middle East.

This is where the question arises, which is increasingly coming back in discussions on the energy market. Can the tensions around Iran indirectly bring economic benefits to LNG exporters outside the Gulf region?

This does not, of course, mean that the United States is seeking conflict solely for economic reasons. The reasons for the current situation are much more. However, from the point of view of the energy market, it is difficult not to notice that any major conflict in this region changes global economic dependency.

If the United States and Israel's military efforts to Iran persist for many months, the LNG market will enter a period of long-term uncertainty. The first symptoms of this process are already visible. It is enough to recall earlier crises in the Middle East to see that such conflicts rarely end quickly. The history of the region shows that military operations can last for years, and their economic effects are felt even long after the end of military action.

Under such conditions, multiannual contracts are born

Under uncertainty, energy importers are beginning to think in the long term. Concerns about security of supply from the Gulf region prompt the public to seek stable partners for years, not months.

It is in such situations that long-term contracts for gas supply are concluded. This represents an opportunity for producers outside the region to increase market share. In particular, this applies to the United States, which in recent years have consistently expanded its Export infrastructure.

It is important that the launch of new LNG terminals in the US takes place during a period of growing geopolitical uncertainty. Each new facility increases its ability to respond to market developments and allows to take over some of the supplies that have previously been made from other directions.

Careful hypothesis – one of the elements of a wider puzzle

A cautious hypothesis can therefore be put forward that the current situation in the Middle East is particularly favourable for US LNG exporters. Not because conflict itself is an objective, but because its economic effects can open the way for new contracts and strengthen its position on the global market.

However, it must be made clear that this is only one possible interpretation of the current situation. The tensions around Iran are much broader and are mainly due to political conditions and military.

From an energy market point of view, however, it is difficult to overlook the fact that the prolonged crisis creates conditions conducive to those LNG exporters who are able to quickly increase their supply and take over part of the growing demand for stable energy sources.

This is probably just one element of a much wider puzzle, in which economic interests and long-term energy strategies of the states play an increasingly important role alongside politics and security.