Escalating conflict between the United States and Iran is expected to cause major disruptions in the natural gas market, according to Bloomberg on June 1 (local time).
Qatar, Iran's neighbor, is a major global gas supplier, and 20% of the world's liquefied natural gas (LNG) exports pass through the Strait of Hormuz. South Korea, which imports Middle Eastern crude oil through the strait, is closely monitoring the situation.
Ship tracking data shows LNG trade through the Strait of Hormuz has effectively halted. Traders import a quarter of their supplies from Qatar, the world's second-largest LNG exporter, and are now asking suppliers about alternative sources.
"Naval activity in the Strait of Hormuz, as well as developments related to Qatar's LNG production, will have a particularly negative impact on the market," said Tom Marzec-Manser, director of European LNG and gas at Wood Mackenzie.
Russia's 2022 invasion of Ukraine caused major disruptions in the international gas market. Volatility intensified as Russia was cut off from its largest export markets, sending gas prices to record highs.
Last year, Qatar supplied more than 80% of its LNG production to Asian countries, with China and India as the largest buyers. Cargo bound for Asia and Europe must pass through the Strait of Hormuz, but at least 11 LNG carriers have currently suspended their voyages.
South Korea imported 69.1% of its crude oil from the Middle East last year, with more than 95% of that passing through the Strait of Hormuz.
"There is no substitute," Anne-Sophie Corbeau, a researcher at Columbia University's Center on Global Energy Policy, wrote on LinkedIn. "Europe has relatively less risk exposure but lacks storage capacity, and Asia's outcome will depend on how much volume can be rerouted through other channels."
If the Middle East conflict persists and shipping disruptions continue, the risk of LNG production and export disruptions is expected to rise sharply. Stable exports are essential for LNG production, and blocked export routes would inevitably lead to production cuts.
Meanwhile, South Korea's Ministry of Oceans and Fisheries held an emergency meeting chaired by Acting Minister Kim Sung-beom to assess safety management of Korean vessels following U.S. and Israeli airstrikes on Iran.
As of 10 a.m. that day, 37 Korean vessels were operating in waters near the Strait of Hormuz, the Persian Gulf, and the Gulf of Oman.
A ministry official said, "VHF warning broadcasts, believed to be from Iranian authorities announcing a strait blockade, have been confirmed as being transmitted to vessels navigating near the Strait of Hormuz."
Following the meeting, the ministry sent official letters to vessels and shipping companies navigating the Strait of Hormuz and nearby waters, advising them to refrain from operations.
"There has been no official blockade measure yet, but we are responding preemptively as the situation is developing rapidly," the official said. "We are maintaining a 24-hour monitoring system and closely watching the situation."
The official added, "Given the limited food and resources stockpiled on vessels, problems could arise if they have to wait for an extended period, so we are preparing for that." Affected vessels will stand by in nearby waters until the situation is resolved. No damage to Korean vessels or crew has been reported so far.