Global LPG Conversations: Middle East War Hits Global LPG Markets

The sudden closure of the Strait of Hormuz sent shockwaves through the global LPG market, with the August Argus Faris Index (FEI) soaring 24% in a single week while the Saudi CP benchmark rose a modest 7%. This price divergence reflects the immediate loss of Middle East cargoes and the resulting scramble for alternative supplies. Asian buyers, traditionally reliant on Gulf exports, turned to U.S. LPG, driving up competition for U.S. cargoes and pushing forward‑month pricing into backwardation. The rapid price spike underscores how geopolitical chokepoints can instantly reshape pricing curves.

Compounding the Hormuz shutdown, Saudi Aramco’s force majeure at the Juwama terminal—responsible for 75% of Saudi LPG exports—removed roughly half a million tonnes per month from the market. The timing coincided with pre‑existing tightness in Asia, where Chinese petrochemical demand had already lifted FEI premiums to ten‑month highs. Down‑stream impacts rippled across the region: Vietnam’s PV Gas and Hyeongsang Vena declared force majeure on residential and industrial deliveries, while Chinese PDH plants began cutting throughput as propane and butane costs surged 25% in import‑price benchmarks. These disruptions amplified price volatility and heightened uncertainty for both cooking‑fuel and petrochemical users.

Looking ahead, the loss of roughly 40 million tonnes—about 30% of global seaborne LPG—poses a structural supply gap, especially for India, which sources 90% of its LPG from the Gulf. Prolonged shortages could trigger demand destruction, prompting petrochemical operators to lower operating rates or switch feedstocks, and forcing households to consider alternative fuels despite logistical hurdles. Potential mitigants include ramped‑up U.S. production, OPEC output adjustments, and the release of high global inventories that have so far cushioned price spikes. However, the market’s trajectory will hinge on the duration of the conflict and the speed at which alternative supply chains can be mobilized.