The Hidden Economic Crisis Inside the Iran War: What Happens to Asian LNG Buyers

Europe and Asia are now competing for the same scarce LNG cargoes. Here is how the Iran war is creating an energy crisis that most media are missing entirely.

The coverage of the Iran war's energy consequences has focused, understandably, on Europe — the continent with the most visible political and economic exposure to the Hormuz crisis. But there is a parallel energy story playing out across Asia that is, if anything, even more acute in certain dimensions, and that will have significant consequences for how the global LNG market rebalances over the coming months.

Japan, South Korea, and Taiwan collectively import more LNG than any other region in the world. Japan alone imports approximately 70 million tonnes per year — more than all of Europe combined. The overwhelming majority of this LNG arrives from the Gulf region, primarily Qatar and the UAE, through shipping routes that pass through or near the Strait of Hormuz. When that route becomes restricted, Asian buyers face the same fundamental problem as European buyers: they need the gas and there is nowhere else to get it quickly.

The difference between the Asian and European situations is structural. European countries that have high renewable electricity penetration — particularly Germany, Denmark, and Spain — have been able to substitute away from gas-fired power generation at the margins, reducing demand somewhat. Asian economies, with much lower renewable penetration ratios, have less flexibility on the demand side.

The result is an LNG auction that no one explicitly organized but that is happening in real time: Europe and Asia competing for the same cargo slots on the same LNG vessels, with the price discovery mechanism driving both TTF in Europe and JKM (the Asian LNG benchmark) to levels not seen since the worst of the 2022 crisis.

Japanese Prime Minister Fumio Kishida has activated emergency energy protocols, including the controlled draw-down of strategic LNG reserves and a request for voluntary industrial demand reduction from Japan's largest energy-consuming sectors. Korean energy authorities have implemented mandatory demand response programmes for large industrial users.

For the global LNG market, this demand competition means that prices will remain elevated even if the Hormuz situation partially resolves, because the underlying shortage created by several months of supply disruption cannot be quickly reversed.