Consulting firm Wood Mackenzie posits 3 scenarios for how the latest war for Oil will play out – short, medium and long term impacts modeled.
An extended war plays havoc with Trump administration plans for global domination with US Liquified Natural Gas (LNG).
Quick Peace scenario: LNG prices soften soon after a peace deal is announced, but global LNG markets are tight until summer 2027. LNG supply from undamaged Gulf facilities take time to return to full capacity, with delays to projects currently under construction in the region. The anticipated oversupply, albeit delayed until 2028, remains inevitable once the strait reopens from June, however.
With a major expansion in global LNG capacity under construction, supply is set to increase by about 50% from current levels, restoring confidence in LNG and driving a new phase of demand growth in emerging Asian markets. However, the combined impact of short-term demand destruction and levels of new supply results in a market imbalance. US LNG cargo cancellations are likely to be required to balance the market, more than halving European prices by 2031. Prices then recover slightly between 2030 and 2035.
Summer Settlement scenario: prices continue to increase through summer 2026 and remain strong well into 2027. Additional delays to Gulf projects under construction reduce supply further, but this only pushes the oversupply into 2029. As countries look to reduce their exposure to LNG, demand downside risk cannot be ruled out, potentially exacerbating the oversupply after 2030.
Extended Disruption scenario: the global LNG market is fundamentally reshaped. Prices skyrocket, potentially reaching US$40/mmbtu if the conflict restarts. Persistent geopolitical risks and sporadic Strait closures could reshape the LNG market in the long term.