Natural Gas in Focus: Iran Conflict Could Have ‘Very Painful’ Consequences

Oil is dominating the headlines in the wake of the Iran conflict, there's an equally unsettling story unfolding in the natural gas markets. Markets. I'm Allison Nathan, and this is Goldman Sachs Exchanges. For today's episode, I'm sitting down with Samantha Dart, co head of global commodities research, to talk about the implications of a natural gas shock, which may, in some cases, actually be more damaging than an oil shock. Sam, welcome

back to Exchanges. Thanks for having me. Sam, we

have talked a lot on this podcast about the impact that the war in Iran is having on oil markets. But today, I wanna dig into the implications for natural gas markets and liquefied natural gas, which is commonly referred to as LNG, because I think it's actually an area that a lot of our listeners underappreciate in terms of this conflict and in terms of its importance in the economy. So let's just start at a high level. First, give us the basics. What makes natural gas markets fundamentally different in how they respond to geopolitical shocks?

Yeah. I think the main difference is the seasonality of demand, the fact that you need so much of it in the winter. And maybe we should take a step back and think, what do we use this thing for? And there are three main uses. The first one you can think of is electricity generation. Just you have a lot of utilities they have. In the same way they have nuclear plants and coal plants, they have natural gas run power plants. You also have a lot of use of natural gas for industrial applications. You can either use that directly as a feedstock into whatever you are producing or what is most common

Right. So both industry, if I'm hearing you correctly, and households are very exposed to these natural gas disruptions, and the seasonality plays a big part in this. If we think about what's happening in the war right now and the escalation we have seen, there's been attacks, reported attacks on Qatari LNG infrastructure, liquefied natural gas infrastructure. So that's put at risk 20% of global LNG supplies. Just give us an update on where we are in terms of the supply picture right now amid this conflict.

Yeah. When we look at 2025 data, Qatar produces the equivalent of just about 20% of global LNG supplies, and all of that is disrupted at the moment. It's all shut down. Their capacity is shut down. And we had the bombings of infrastructure a couple of weeks ago that has caused long term damage to some of that infrastructure. So even when the flows through the Strait Of Hormuz are restored, Qatari supply is not going to fully come back to normal for many years. So if we think about how the market has actually responded to these massive disruptions, Give us the lay of

the land. And is there anything surprising about how the market has reacted?

Yeah. To be honest, I would have expected prices to have rallied more than they have. Prices have gone up. Don't get me wrong. They've gone up over 50% already. I would say between 5070%, depending on the day. But that's only enough to make natural gas more expensive than coal. And that does help if you're making natural gas more expensive than coal. You're creating the incentive for utilities, okay, just burn more coal and leave the gas alone for storage for the winter. But for a shock of this magnitude, I would have expected more. I would have expected that natural gas would maybe become mor

Let me just interject for a second because it is an interesting dynamic, this substituting dynamic. Maybe just give us thirty seconds on what that looks like when you talk about all this substitution a