The prolonged closure of the Strait of Hormuz has severely disrupted global liquefied natural gas (LNG) exports, triggering an intense energy "bidding war" across Eurasia. "Any spot LNG cargo released into the market is immediately snapped up by buyers," said Henik Fung, a senior analyst with Bloomberg Intelligence's global energy team, describing the fierce competition in the current spot LNG market. He warned that even if the geopolitical conflict ends soon and the strait reopens, the competition to replenish inventories over the next three to six months will remain intense due to depleted stockpiles. According to U.S. Energy Information Administration (EIA) data, approximately 20% of global LNG typically transits the Strait of Hormuz, with about 80% to 90% destined for Asian markets. The current Middle East situation has nearly "severed" this supply. While most of the European Union's natural gas imports come from regions other than the Middle East, the butterfly effect of this global supply disruption is forcing European buyers into intense competition with Asian buyers for the limited flexible spot LNG cargoes available. Consequently, data from Intercontinental Exchange (ICE) shows that the Japan Korea Marker (JKM), the Asian benchmark for natural gas, has surged 65% since late February. The Dutch Title Transfer Facility (TTF) price, Europe's benchmark, has also soared nearly 60%. Explaining the underlying logic of this commodity price surge, Roukaya Ibrahim, Chief Commodity Strategist at global investment research firm BCA Research, stated that as globally observable official oil and gas inventories are drawn down to historical extremes, the "safety cushion" for consumers and market institutions will shrink dramatically. This will inevitably force a sharp upward revision in the price centers of oil and natural gas to hedge against the risk of strategic reserves being depleted. Europe faces a severe test in replenishing its storage for winter. It is now certain that European countries have started their stockpiling process early. Fung noted that European natural gas inventories are at multi-year lows, and the EU has issued warnings to member states, expecting a significant expansion of the LNG supply gap this year. Therefore, countries have had to start preparing for winter storage as early as March and April. However, actual inventory data is not optimistic. According to data from the Swiss Federal Office of Energy, as of the latest update on May 15, the storage level at EU natural gas facilities was only 36.1% of full capacity, a full 13.4 percentage points below the five-year average (49.5%). Before the heating season, the EU generally requires a storage fill rate of 90%. EU law allows countries a 10-percentage-point deviation from this target, with an additional 5-percentage-point flexibility in extremely unfavorable market conditions. However, the EU Agency for the Cooperation of Energy Regulators (ACER) recently issued a warning, expecting that EU countries will be unable to meet the EU's legal requirement of raising natural gas storage to 90% of capacity before this winter, likely achieving only a lower injection level of 80%. Reaching even this level "will likely come at a high premium cost" and, due to the lack of buffer, leaves the system highly vulnerable to subsequent supply disruptions. The agency estimates that to raise the storage rate to 90%, the EU would need to increase its LNG imports by 13% compared to 2025. Faced with high costs and tight supply chains, industry associations like Eurogas and the International Association of Oil & Gas Producers (IOGP) have called for the EU to grant more market flexibility in achieving this season's gas storage targets to avoid excessive market pressure during the summer injection (inventory replenishment) season. Simultaneously, Europe's dependency on a single supplier has resurfaced. Since 2021, Europe's LNG imports from the United States have tripled. Last year, 58% of the region's LNG came from the U.S., accounting for about 25% of its total gas consumption. ACER has explicitly warned that the EU's heavy reliance on U.S. LNG could trigger deep market concerns about dependency on a single supplier. "The transoceanic bidding war between European and Asian economies is not only inevitable but has already begun," Ibrahim stated. Ibrahim further explained the transmission mechanism of this competition. Geographically, about 90% of LNG exported via the Strait of Hormuz flows to Asia, giving Europe minimal direct physical exposure. On the surface, this suggests Europe might be relatively insulated from this supply disruption. However, the natural gas spot market is highly globalized. The JKM, Asia's pricing benchmark, and the TTF, Europe's core pricing benchmark, have recently shown synchronized sharp increases. In her view, the reason behind this is the ongoing "chain reaction": extreme shortages in Asia are triggering fierce competition for global cargo flows, which has already diverted some supplies originally destined for Europe. For instance, U.S. LNG carriers and some refined crude oil exports originally headed for European Atlantic ports have been rerouted to Asia, lured by high premiums offered by Asian buyers. In this changing landscape, Fung added that Europe currently faces an extremely difficult task in replenishing stocks. Global LNG supply is highly concentrated in a few countries like the United States, Qatar, Australia, Russia, and Malaysia. Qatar's supply accounts for about 20% of the global total. Damage to related facilities in the recent conflict, with unclear repair and maintenance timelines, has directly created a hard supply gap of about 20% in the market. "In this context, European buyers will inevitably turn to the United States for alternative supply. The problem is that U.S. liquefaction facility utilization is near saturation, while Australia's capacity is largely locked into long-term contracts with Asia. Therefore, even if the Strait of Hormuz reopens, the tight supply situation will be difficult to fundamentally reverse in the short term. Entering summer, with a surge in demand for power generation and air conditioning, LNG demand will strengthen further," Fung analyzed. Based on this assessment, Fung expects the Asian spot LNG price JKM to fluctuate sharply in the range of $15 to $20 per million British thermal units (MMBtu) in the near term. If the conflict remains unresolved, the price center will continue to shift upward. More concerning is the medium- to long-term structural gap. Fung noted that from a long-term perspective, the demand for uncontracted LNG in the Asian market is growing continuously between 2027 and 2030. Typically, downstream companies lock in about 75% of their demand through "take-or-pay" agreements. However, some companies, anticipating an oversupply in the Asian LNG market, did not hedge sufficiently or sign long-term contracts. As the gap between actual consumption and contracted volumes widens year by year over the next four to five years, filling this gap will become a thorny problem. Looking at the long-term scenario, Fung believes the severity of the LNG shortage impact facing Europe and Asia this time could surpass the 2022 energy crisis. He explained, "The 2022 Russia-Ukraine conflict primarily caused a severe shock to the European energy market, but the turmoil in the Middle East carries a stronger global premium. More critically, the market does not seem to have fully prepared for this, lacking psychological anticipation for sudden supply disruptions." Furthermore, the physical damage to core supply sources cannot be ignored. Fung added that while Russian supply was hindered in 2022, the production facilities in Qatar, one of the world's core LNG suppliers, were damaged in the current conflict. This has directly paralyzed about 20% of global supply capacity. A hard supply loss of this scale could have a potentially more negative impact on the global economy than in 2022. Ibrahim also noted a clear divergence between the current natural gas and oil markets. Since the outbreak of the Middle East situation, gas shipments able to pass through the Strait of Hormuz have essentially dropped to zero. In contrast, the oil market still sees some sporadic shipments continuing. There is currently no "detour" mechanism for natural gas, whereas oil has existing pipelines in the UAE, Saudi Arabia, and Iraq, which somewhat alleviates supply pressure. "What I think all this means is that as long as the strait remains closed, the gas market is likely to stay tight," Ibrahim said. Given that QatarEnergy's LNG facilities have been damaged and attacked, this supply disruption could be quite prolonged from a time-span perspective. However, she also stated that for the future evolution of the gas market, the good news is that a considerable amount of new LNG capacity is scheduled to come online in the coming years, starting in the second half of this year. This should alleviate some of the immediate pressure in the gas market. "Assuming a very optimistic scenario where the strait reopens within May, the ultimate impact on global LNG supply would be a reduction of about 6% in 2026 LNG supply. Comparing this to the new LNG capacity expected to come online in the second half of this year, which would bring a 5% supply increase, it would offset part of the disruption's impact but not completely erase it," she said. Based on this, Ibrahim believes, "This means prices will stay elevated for a period, but unless this supply disruption becomes more protracted, I don't think we will see another massive price spike. Over time, new LNG capacity from other regions will enter the market, providing a hedging effect."