War profits, quantified

The Strait of Hormuz is closed. Qatari exports are shut-in. Missiles are raining down across the Middle East… and US LNG profits are sky-rocketing.

As the US-Iran conflict escalates, European gas and Asian LNG prices are surging. QatarEnergy declared force majeure on its LNG exports on 2 March after liquefaction facilities were damaged by an Iranian drone strike.

Without a clear timeline for repairs, the market is scrambling to reprice uncertainty. And the rally is showering additional export value for US LNG volumes entering Europe and Asia.

The nominal profitability of a single LNG cargo delivered into Europe jumped from ~$25 million last week to more than $50 million as of 2 March, according to Energy Flux calculations. US LNG profits in Asia also spiked.

Based purely on today’s prices, American exporters are already accumulating roughly $870 million per week in additional margin above their pre-crisis baseline. And that rate is climbing.

The scale of potential gain depends almost entirely on one variable: duration.

New data modelling by Energy Flux estimates that American LNG exports could generate up to $4 billion in windfall profits if the force majeure remains in effect for one month.

This figure could rise as high as $20 billion per month if the market is deprived of Qatari supply until the summer.

Cumulatively, US LNG war profits rise sharply the longer the Middle East conflict drags on, as prices spiral on physical tightening of global balances.

Over the first four months, US LNG profits could reach more than $33 billion above the pre-Iran average. Over eight months, that figure rises to $108 billion.

And if, in an extreme scenario, Qatari LNG is shut-in for a full year, the excess profits raining down on US LNG exports could stack up to almost $170 billion — a figure that would represent one of the most concentrated commodity windfalls of the post-2000 era.

To put that in context, the 12-month Ukraine war windfall accruing to US LNG exporters, from August 2021 through August 2022, is estimated at $84 billion. Iran could, in certain circumstances, eclipse that total in just over six months.

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Qatar in a Strait jacket

Qatar’s LNG export terminals, with a nameplate capacity of ~80 million tonnes per annum (mtpa), were shuttered after being damaged in an Iranian drone strike. QatarEnergy’s declaration of force majeure dropped just as insurers withdrew war-risk insurance coverage for Strait of Hormuz transit, essentially closing the waterway to all commercial traffic.

Ships dropped anchor either side of the narrow maritime bottleneck, and Middle East hydrocarbon outflows slowed to a trickle.

The effects are only just starting to be felt in global commodity markets. TTF, the European gas benchmark, rallied 70% in two days to settle at €54/MWh ($18.60/MMBtu) on 3 March.

The price action was even more dramatic in Asia, the primary destination for Qatari LNG. Platts JKM, the spot LNG benchmark, spiked 96% over the same timeframe to hit $21/MMBtu for May’26 delivery. The extreme response reflects the market factoring in Asian buyers leaning on the spot market to replace lost Qatari supply during a prolonged Hormuz closure.

An immense wealth transfer from LNG importing economies to exporters and traders is looming. To gauge the size of the prize, Energy Flux developed a bespoke War Profits Model to test various assumptions and scenarios.

The model assumes European and Asian prices will nearly triple from today’s levels before demand destruction and partial supply responses begin to cap the rally. The model is downloadable and can be modified by users to test different geopolitical outcomes.

💥 Article stats: 2,800 words, 11-min reading time, six charts, 1 downloadable data model