[Middle East Energy Shock]② 'Aftermath of Iran Airstrikes' LNG Prices Double... Impact on Korean Economy?

Highest Level in Three Years Since 2023
Qatar Imports Expected to Reach 7 Million Tons Annually
Price Surge a Bigger Concern Than Supply Disruptions
"Reserves Sufficient... Prolonged Crisis Could Have Impact"

On the 4th, a view of the LNG storage tanks at the Korea Gas Corporation Incheon Production Base in Songdo, Yeonsu District, Incheon, which has the largest liquefied natural gas (LNG) storage capacity in the country. March 4, 2026. Photo by Yonhap News.

Due to the aftermath of the Iran attack by the United States and Israel, the spot price of liquefied natural gas (LNG) has soared to its highest level in three years. Most of the LNG imported domestically is under long-term contracts, so the immediate impact is expected to be limited. However, if the Iran situation is prolonged, shocks are expected in the power generation and industrial sectors that use LNG.

According to Bloomberg News, as of March 3, the spot price of LNG traded in Asia reached 25.4 dollars per MMBTU (million British thermal units). This is a 137% increase from 10.7 dollars on February 27, just before the Iran attack by the United States and Israel.

On March 3, European natural gas futures prices at one point soared to 61.7 euros per megawatt-hour (MWh). Bloomberg explained that this was a surge of more than 70% compared to the previous Friday and marked the highest level in three years since 2023.

LNG prices stabilized somewhat after U.S. President Donald Trump stated that all necessary measures would be taken to stabilize energy prices, but the situation remains volatile and prices could spike again at any time.

After Iran and Qatar LNG Facility Attacks, Prices Surge

LNG prices sharply increased after Iran blocked the Strait of Hormuz, through which oil tankers pass, and then attacked Qatar's LNG production facilities with drones. Qatar accounts for about one-fifth of the world's LNG supply.

The sharp rise in LNG prices compared to crude oil is due to inflexible supply. LNG requires specialized facilities for liquefaction, storage, and transportation of natural gas, making supply and demand adjustments difficult. If Qatar’s natural gas liquefaction facilities halt operations, it is hard to secure alternative sources, resulting in a surge in prices.

Bloomberg expressed concern that LNG prices could climb even higher if European and Asian countries compete to secure alternative sources.

Qatar is one of the main sources of LNG imports for Korea. According to Korea Gas Corporation, as of 2025, Middle Eastern countries such as Qatar and Oman account for about 20% of Korea’s total LNG imports. However, this proportion is expected to decrease to around 15% this year as the long-term contract with Oman comes to an end.

The Korea Energy Economics Institute projects that Korea's domestic LNG demand will reach approximately 46 million tons this year. Of this, imports from Qatar, including both long-term contracts and spot purchases, are expected to amount to about 7 million tons.

Australia accounts for the largest share of Korea’s LNG imports. In 2023, Australia made up 23% of total imports. Qatar, Malaysia, and the United States followed.

If Prolonged, Burden on Domestic Electricity Rates

More than half of the LNG imported domestically is used for power generation, while the rest is used for residential heating and industrial thermal processes. For Korea, the impact of price surges due to the Strait of Hormuz blockade is expected to be greater than the impact of supply disruptions. Professor Cho Hongjong of Dankook University's Department of Economics said, "This is more of a price issue than a supply issue right now," adding, "Over time, it could affect domestic supply prices."

In this regard, a Korea Gas Corporation official explained, "Most of the LNG imported from Qatar is under long-term contracts, so it is not immediately affected by the surge in spot prices." LNG under long-term contracts is linked to crude oil prices, so the price does not rise sharply. However, if crude oil prices increase in the future, the price of long-term contract volumes will also rise in tandem.

According to the energy industry, long-term contracts account for about 80% of Korea’s total LNG import volume. The remaining 20% is purchased on the spot market depending on market conditions at the time.

Roh Namjin, Head of Gas Policy Research at the Korea Energy Economics Institute, said, "LNG spot prices are usually reflected with a lag of one to two months," adding, "There are sufficient reserves in Korea, so the impact of soaring LNG prices on the domestic economy will be limited, but if the Iran situation lasts for three to four months, there will be an impact."

The Korea Gas Corporation is required to maintain a stockpile for at least nine days, but in reality, it is known to have secured more reserves than this.

If the Iran situation is prolonged, the power generation sector will be the most affected by LNG price increases. LNG prices are a direct factor in determining the system marginal price (SMP) in Korea's electricity market. An increase in SMP puts upward pressure on electricity rates.

Professor Cho Hongjong explained, "Since LNG under long-term contracts is also linked to crude oil prices, it will affect Korea in four to five months," adding, "If the Iran situation lasts for a long time, it could become a burden during this summer when electricity demand peaks."

One fortunate aspect is that Korea is entering a season when LNG demand decreases. From April to June, demand for LNG seasonally declines, and domestic gas boiler use also decreases.

This content was produced with the assistance of AI translation services.