What a prolonged LNG supply shock could mean for gas prices and inflation

Strait of Hormuz closure disrupts 20% of global LNG trade, tightening supply and increasing competition with Asia for US cargoes. Government intervention would be needed to facilitate restocking

Europe is better prepared than in 2022 due to LNG diversification and renewables, but prolonged disruption could still escalate pressure

Industrial gas curtailments and fuel switching to coal or oil in price-sensitive regions like China could ease global LNG demand, partially offsetting price pressures in Europe

Gas prices may rise to 90-130 EUR/MWh by Q4 if disruptions are prolonged, with prices rising above 180 EUR/MWh if the war persists into 2027

Economic impact depends massively on the duration of the price shock

Eurozone inflation could rise 1.5pp in a prolonged gas supply shock…

…with second round effects in food and goods, and a further sustained surge in oil prices, potentially pushing inflation above 6%