In January 2026, Pakistan had an LNG surplus. Bangladesh took supply of its first cargo below a brand new 15-year QatarEnergy provide settlement. Sri Lanka, nonetheless rebuilding from its 2022 sovereign debt disaster, was managing its vitality import prices with cautious optimism.
Seven weeks later, the Strait of Hormuz was successfully closed, QatarEnergy had declared power majeure at Ras Laffan – the world’s largest LNG liquefaction facility – and all three nations have been in emergency administration mode. The contracts that they had signed to ensure vitality safety had turn out to be a lure.
South Asia’s dependence on LNG from the Persian Gulf area is now the area’s most acute financial vulnerability. In 2025, Pakistan, India, and Bangladesh bought the most important share of their LNG from Qatar and the United Arab Emirates (UAE). Pakistan sourced greater than 90 p.c of its crude oil from the Persian Gulf. Bangladesh imports roughly 95 p.c of its whole vitality wants. The continued Iran-Israel-U.S. struggle – and the ensuing vitality disaster – has demonstrated, with precision that no modeling train may have produced, the structural failure of this focus of provide by way of a single maritime hall.
Yesterday’s Resolution
South Asia’s LNG dependency was the product of deliberate coverage selections made below real constraints. Bangladesh’s home fuel fields, which as soon as provided the vast majority of its electrical energy, have been depleting for years. Pakistan got here inside weeks of sovereign default in 2022 when LNG spot costs spiked past what it may afford. Sri Lanka misplaced the flexibility to buy gasoline on worldwide markets fully throughout its overseas alternate disaster.
2026 marks the second time in 4 years that South Asia’s Gulf LNG dependency has produced financial emergency. In 2022, the Russia-Ukraine struggle triggered a European scramble for LNG that pushed spot costs past what Bangladesh and Pakistan may afford. The coverage lesson governments drew was to signal extra long-term contracts to lock in provide and keep away from spot market publicity.
For all three nations, long-term LNG contracts with Gulf suppliers represented rational responses to acute provide and affordability issues. The Gulf states provided negotiated charges and provide certainty. The South Asian governments signed.
The logic was defensible. Lengthy-term contracts present value stability relative to identify markets, which South Asian patrons discovered to worry in 2022, when LNG spot costs spiked to $70 per million British thermal models and Bangladesh and Pakistan endured rolling blackouts as contracted suppliers diverted cargoes to higher-paying European patrons. Lengthy-term contracts have been designed to stop precisely that.
They didn’t account for the situation now unfolding: the bodily closure of the hall by way of which all these contracted cargoes should journey. Amid the closure of the Strait of Hormuz, Gasoline Outlook predicted that Bangladesh, Pakistan, and Sri Lanka will likely be “hardest hit from the value fallout.”
In the present day’s Downside
The affect will play out in another way for every nation, however the issue shares a standard basis.
Bangladesh signed a brand new 15-year settlement with QatarEnergy in June 2023, with deliveries starting January 2026. QatarEnergy declared power majeure at Ras Laffan on March 4 – simply seven weeks after the primary cargo arrived in Bangladesh. Subsequent Iranian strikes on the power have since knocked out roughly 17 p.c of Qatar’s LNG export capability, with QatarEnergy’s CEO telling Reuters the injury will sideline 12.8 million tonnes per yr for 3 to 5 years. What initially seemed like a short lived disruption has snowballed right into a near-term provide hole – and Bangladesh’s contract meant nothing after Qatar’s invocations of the power majeure clause.
Bangladesh has since closed all universities to preserve electrical energy, imposed gasoline caps, and stationed troops at oil depots to stop hoarding. The nation is buying substitute LNG on the spot market at almost thrice pre-conflict costs.
Pakistan’s scenario is structurally completely different however equally revealing. It had gathered an LNG surplus as just lately as January 2026, with terminal utilization operating under minimal dispatch ranges as photo voltaic vitality development had diminished fuel demand. However the outbreak of struggle within the Gulf area concurrently reduce off new provide and created emergency home shortages.
Like Bangladesh, Pakistan has taken emergency measures: suspending LNG provide to the fertilizer sector, closing colleges and universities, and lowering terminal regasification charges.
Additionally like Bangladesh, Pakistan is managing the emergency whereas holding long-term contracts it could actually neither fulfill nor simply exit. IEEFA analysis has recognized a possible extra of 177 cargoes in Pakistan’s long-term LNG contract portfolio by way of 2032, carrying a legal responsibility of $5.6 billion or larger at present costs.
Sri Lanka, which reintroduced gasoline rationing and a four-day authorities work week, faces analogous constraints in a smaller financial system with even thinner buffers.
In every case, long-term LNG contracts have been supposed to offer certainty after the value shock of 2022. It was the appropriate response to at least one vulnerability, however blind to a different. Lengthy-term contracts deal with value volatility. They don’t deal with the bodily closure of the route by way of which contracted provide should journey. The 2026 disaster is 2022’s sequel: a special failure mode, produced by the identical underlying dependency.
Provide chain disruptions ought to throw into query South Asia’s plan to extend provides of – and reliance on – imported LNG. International Power Monitor estimated that Bangladesh and Pakistan have proposed LNG import capability expansions that may roughly double every nation’s present infrastructure – a part of a mixed $107 billion in potential South Asian funding in fuel terminals and pipelines.
The one biggest threat to LNG provide chains – the closure of the Strait of Hormuz – has simply been demonstrated in actual time. Doubling down on the identical infrastructure mannequin is a coverage selection value analyzing rigorously.
One other Means Ahead
South Asia’s long-term LNG contracts have been rational responses to the vitality safety downside because it was understood on the time of signing – one outlined by spot market volatility. However these contracts couldn’t resolve the structural vulnerability posed by geography: the focus of a whole area’s fuel provide by way of a single maritime chokepoint that no South Asian authorities controls or can defend.
There may be an alternate: lowering dependency on LNG fully, somewhat than making an attempt to safeguard provides.
Pakistan’s photo voltaic enlargement – which has meaningfully cushioned its electrical energy sector within the present disaster – illustrates what the choice appears like in observe. The IEEFA calculated that each gigawatt of photo voltaic generated in Pakistan avoids roughly $3 billion in LNG import prices over 25 years. Past the fee financial savings, each gigawatt of home photo voltaic capability is a gigawatt that doesn’t depend on vitality sources making it by way of Hormuz.
Bangladesh, which has invested much less aggressively in home renewables, has had significantly much less cushion. The distinction between the 2 nations’ disaster responses is, partly, a distinction between their renewable vitality funding choices over the previous 5 years.
The case for a transition to renewables, then, shouldn’t be solely about local weather change, although it carries local weather implications. It’s strategic. Photo voltaic panels and wind generators don’t expose treasuries to the pricing choices of overseas state-owned vitality corporations. They don’t require ships to transit a strait that may be closed. For South Asian governments now assessing their vitality safety posture within the aftermath of this disaster, that distinction is probably the most consequential analytical discovering the present disruption has produced.
In January 2026, all three nations – Bangladesh, Pakistan, and Sri Lanka – had cause for cautious vitality optimism. By March, all three have been managing emergencies. That sudden shock made apparent their deep vitality dependency on a single maritime hall that none of them controls. The vitality safety methods South Asian governments construct within the aftermath of 2026 will decide whether or not the area stays uncovered to the subsequent disruption on the identical scale – or begins to cut back the geographic focus that made this one so damaging.
