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The demonstrations in Iran that began in late December 2025 have posed a serious challenge to the Iranian government. While the protests have been quelled for now, the root causes of the unrest remain unaddressed, and the possibility of direct US military intervention cannot be ruled out.
From an energy perspective, persistent political instability in Iran is likely to have significant implications for the country’s vast gas resource potential. As outlined in a previous analysis by the authors, Iran’s gas system is structurally constrained by years of sanctions; in consequence, any political shock can rapidly trigger supply disruptions affecting neighboring countries and the global gas market.
This blog post analyzes several downside and upside scenarios for Iranian gas. These scenarios are neither exhaustive nor probability weighted; they were chosen to highlight the risks that Iran’s structurally constrained gas system and strategic location pose to regional and global markets. Downside risks materialize quickly either because Iran’s gas system is structurally constrained, leaving importers exposed to even small shocks, or as a result of Iran blocking the Strait of Hormuz or attacking neighboring oil and gas facilities, which would disrupt energy markets regardless of Iran’s gas balance. Upside outcomes require sustained political stability, external investment, and time. While long-term growth for Iran’s gas sector remains possible, short-term regime destabilization could produce negative outcomes both for regional importers of Iranian pipeline gas and for liquefied natural gas (LNG) importers worldwide. Ultimately, Iran’s gas outlook is shaped less by the size of its resource base than by enduring systemic constraints.
Persistent internal turmoil or US military action resulting in a significant disruption of regional pipeline exports and swap arrangements, absent a massive Iranian military response
This scenario poses a challenge to regional countries that import Iranian pipeline gas, but not one they wouldn’t be able to manage. As of late 2025, Iran was still exporting gas directly to Turkey and Armenia, though exports to Iraq had been disrupted. Iran is also involved in three operational swap arrangements, though only one—the Nakhchivan agreement—seemed to meet expected contracted volumes in 2025. Iranian swaps from Turkmenistan fell well short: deliveries to Turkey amounted to 0.465 billion cubic meters (bcm) versus a contracted volume of 1.3 bcm/y, while deliveries to Azerbaijan reached about 0.23 bcm over the first 10 months of 2025, compared with contracted volumes of up to 2 bcm.
Consequently, about 10-15 bcm of gas exports are at stake for Iran’s regional neighbors (Table 1). Turkey could offset the loss of Iranian gas and the Turkmenistan swap—and supply the enclave of Nakhchivan in Azerbaijan via the new Iğdır-Nakhchivan pipeline—through imports of spot LNG or Russian pipeline gas. Spot LNG imports would exacerbate the market impact with higher prices. Meanwhile, Armenia can access more Russian pipeline gas, and is considering imports from Azerbaijan, although the required infrastructure has yet to be developed. Iraq can import LNG once its new LNG import terminal is operational in the summer of 2026, provided it accelerates the installation of its floating storage and regasification unit (FSRU). Azerbaijan could compensate for the loss by managing its domestic demand and/or slightly reducing exports.
Table 1: Alternative supply options and market impacts following a halt in Iranian exports and swaps
Note: All volumes are rounded.
A direct US strike on Iran leading to retaliation by remaining leadership that disrupts critical LNG infrastructure in the Gulf
This scenario involves Iranian retaliation targeting shipping transiting the Strait of Hormuz, which accounted for around 19 percent of global LNG exports (slightly over 110 bcm) in 2025—with 26 percent destined for China, 19 percent for India, and 25 percent for Japan, South Korea, and Taiwan. This would shock global oil and gas markets, cause prices to skyrocket, and potentially prompt a US-led military response. Previous analysis suggests that, if Iran were to close the Strait, such a response could reopen it within weeks.
A variant of this scenario could occur if the US strike disrupted Iran’s chain of command, leaving isolated officers in charge of long-range missiles. Should those officers decide to strike Qatar’s main LNG production site, Ras Laffan—where all of the country’s liquefaction trains are located—global gas markets could immediately lose up to 105–110 bcm/y of LNG export capacity and face the prospect of damage to trains under construction, which is particularly consequential given Qatar’s status as one of the world’s two leading sources of additional LNG exports.
The abrupt loss of Qatari LNG would be far worse than the removal of Russian pipeline gas in 2022, which involved a smaller volume (about 80 bcm) and occurred gradually over several months. While the United States would, ironically, benefit by remaining the largest source of new LNG supply over the next five years, LNG importers worldwide would compete for the remaining LNG volumes at record high gas prices. Asian markets would face unfillable supply gaps, and Europe—despite importing smaller volumes from Qatar—along with all spot-reliant countries would be hit by a surge in spot prices.
These scenarios are all long term and would require a fundamentally different political and economic environment, allowing Iran to address the above-mentioned structural constraints.
Iranian government or leadership change, rapid sanctions removal, and Western engagement, leading to the reopening of Iran’s upstream and midstream sectors to international investment, services, and technology
This scenario would have three main consequences: stabilizing South Pars production through pressure-boosting and compression investments; reducing losses and flaring; and expanding export infrastructure, including regional pipelines and LNG facilities.
Iran has long sought to develop LNG export capacity, but its flagship projects—the 10.8 million tonnes per annum (Mtpa) Iran LNG, the 10 Mtpa Pars LNG, and the 16.2 Mtpa Persian LNG—have repeatedly stalled under sanctions due to financing limitations and restricted access to liquefaction technology. While parts of Iran LNG have periodically been described as closer to completion, LNG requires longer lead times and is a technically and commercially more challenging option than expanding existing pipeline exports to neighboring countries or developing new routes to more distant markets like Pakistan. Indeed, the Iran-Pakistan-India pipeline is half completed, already reaching the Iranian border.
If sanctions were removed early and investment conditions were supportive, Iran could plausibly add around 40–60 bcm/y to international gas trade within five to seven years. This increase could come through restored and expanded regional pipeline exports and the first wave of LNG exports (e.g., 10–20 mtpa). This is not a forecast, but rather a plausible capacity-building envelope given Iran’s resource base and the historical scale of its shelved LNG ambitions—conditional on sanctions relief, full access to liquefaction technology, and sustained project execution.
Given Iran’s low upstream resource costs and its strategic location between Asia and Europe, the country is structurally well positioned to undercut other exporters. While low upstream costs do not necessarily translate into lower marketed LNG prices, Iranian LNG volumes entering the market at the late phase of the third wave could reinforce a sustained “lower for longer” price environment and expand gas affordability in parts of the developing world. However, such volumes would compete against US LNG, with potential consequences for market shares and export economics.
Iran remains under US sanctions and deepens its energy partnership with China, with additional support from Russia, while pursuing LNG export monetization through non-Western finance, non-Western Engineering, Procurement, and Construction (EPC) capacity, and alternative liquefaction solutions.
The key question in this scenario is whether Iran would be able to overcome the bottlenecks that have historically constrained Iranian LNG: access to large-scale liquefaction technology, specialist equipment, and LNG shipping (including insurance and certification). Given that US sanctions would still be in place, pipeline exports would be under pressure.
Recent efforts to sanction Russian LNG demonstrate that, under certain conditions, sanctioned volumes can still find a market—especially China—sometimes at material discounts or via dedicated logistics chains and payment mechanisms.
Because technology, shipping, and financing constraints would remain in place, the scale of LNG export expansion—as much as 14 bcm/y—would likely be smaller and more regionally concentrated than that of the sanctions-removal case. Although smaller in volume, this flow could still influence the global balance indirectly by displacing LNG supplies that would otherwise go to China or Southeast Asia, thereby weakening the US LNG commercial outlook. Such a segmented trade would exacerbate the increasingly polarized LNG market, with dedicated flows operating largely outside the US dollar system.
With both upside pathways, the key difference is not the size of Iran’s reserves but whether political conditions enable sustained investment, technology access, and export infrastructure development.
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