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The conflict in Iran is a reminder of how quickly global energy markets can be disrupted. It also underscores why advances in things like battery technology — from...
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The Center on Global Energy Policy at Columbia University SIPA is closely following the escalating conflict in Iran and its implications for US national security, Middle East geopolitics, and global energy markets. See all of our coverage here.
With limited fuel-switching options for diminished oil product imports during the Iran war, Asian countries are ramping up coal generation and, where possible, accelerating nuclear restarts.
Industrial gas demand curtailment appears unavoidable in price-sensitive Southeast Asian markets.
Despite high LNG prices, many Asian countries are attempting to secure spot LNG supplies, diverting them from Europe.
So far, China appears relatively unaffected by the shock. The country benefits from ample gas-to-coal switching potential, and strong gas production and pipeline imports have even allowed it to re-export LNG cargoes.
Almost 90 percent of the liquefied natural gas (LNG) that transited the Strait of Hormuz (SoH) in 2025 was destined for Asian countries, which are therefore being disproportionately affected by reduced such supplies amid the Iran war. Japan, Korea, and Taiwan rely almost exclusively on LNG imports, while other countries, such as Pakistan and India, depend on a mix of domestic production and LNG imports. A third group, including China, counts on domestic production as well as LNG and pipeline imports.
This blog post discusses four main response options for countries facing supply shocks. Two are supply-side responses: securing alternative supply and drawing on storage, and two are demand-side responses: fuel switching and demand reduction or destruction. Demand-side responses appear to dominate the current moment: coal switching is the primary tool used by most Asian countries, while price-sensitive Southeast Asian countries have already cut some industrial users. Still, a few countries that have been particularly hard hit by LNG supply cuts are attempting to secure alternative LNG supplies.
Switching to Coal
Given that the SoH closure impacts both oil and gas supplies, switching to oil products is not possible, as they are also in short supply. Switching to coal in the power sector therefore emerges as the primary short-term option. This reflects the limited short-term substitutability of gas as well as the availability and dispatchability of existing and mothballed coal-fired units.
Industrial demand is the main adjustment margin outside the power sector. In the absence of fuel switching options, high gas prices and a high dependency on Gulf LNG supplies (above 60% for Bangladesh, India, and Pakistan) are forcing some Southeast Asian countries to curtail gas supplies to selected industrial users.
In India, the government is prioritizing sectors and overriding existing gas sales agreements. The residential sector and compressed natural gas (CNG) for transport will receive 100 percent supply; tea industries, manufacturing, and other industrial consumers up to 80 percent; fertilizer plants up to 70 percent; and refineries around 65 percent. In Pakistan, some industrial consumers, including fertilizer plants, have been cut. Similarly, in Bangladesh, five out of six major fertilizer factories, representing around 2 bcm/y of gas demand, have been forced to close, while other industries, such as garment factories, are facing gas shortages.
In Japan, industry is not currently facing gas shortages. However, industrial gas consumption could decline if petrochemical plants are forced to reduce operations due to constrained naphtha supplies.
Securing Alternative Gas Supplies
Despite high gas prices, Asian LNG buyers have been actively seeking alternative supplies, primarily through LNG tenders. This trend accelerated after the attack on Qatar’s Ras Laffan LNG production site on March 18. As a result, several cargoes have been diverted from Europe to Asia.
Bangladesh’sPetrobangla launched multiple tenders for spot LNG cargoes in March and April; however, the company is seeking a $370 million subsidy from the Ministry of Finance to cover April’s LNG imports. Indian players have also issued tenders, but as of March 24 had secured only 4 out of 15 spot cargoes for delivery over the following two months, reflecting difficulties with the tendering process. Similarly, Thairegulatory authorities have approved a plan to procure three additional spot LNG cargoes for delivery in March–April, while Taiwan has initiated an alternative LNG supply plan for May. Japan has been holding talks on intercompany LNG transfers and alternative spot procurement, and Japan’s largest power company, JERA, has been exploring additional supplies and signed a memorandum of understanding with Korea’s KOGAS to further optimize their LNG operations.
Some Asian buyers have also been pursuing long-term supply arrangements.Taiwan’s CPC secured a new 1.2 million tons per annum (mtpa) contract with US Cheniere a few days before the conflict began, and will receive additional US LNG starting in June 2026. Meanwhile, a buyer in Vietnam has signed a preliminary contract with Russia’s Novatek, likely seeking to capitalize on the EU ban on short-term Russian LNG contracts. India has also been considering resuming purchases of Russian LNG.
One exception to this focus on imported LNG isPakistan, which had curtailed domestic gas production before the conflict to accommodate high contracted LNG volumes but has since lifted these restrictions.
China also appears to be an exception to this buying trend. Due to comfortable amounts of gas production and pipeline imports, the country imported record-low levels of LNG and re-exported 8 to 10 LNG cargoes in March.
Tapping Storage Volumes
Most Northeast Asian countries have LNG storage that can typically provide 10–30 days of supply. China has both underground gas and LNG storage. Unfortunately, public data on storage volumes in Asian storage facilities are limited.
Taiwan, with 11 days of storage (0.7 million tons [mt]) is one of the countries most impacted by the Middle East conflict (affecting one-third of its LNG supply). Japan appears to be in a better situation with LNG inventories for power generation at 2.19 mt as of March 29. China reportedly had high inventory levels at the end of February, including 16.8 bcm of underground storage, contributing to its comfortable supply situation.
When the Iran War disrupted shipping through the Strait of Hormuz and tightened global gas balances, a familiar assumption quickly resurfaced: Russia, possessing the largest proven natural gas reserves in the world, would inevitably emerge as one of the principal beneficiaries.
