“Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns; the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”

- Donald Rumsfeld, George W. Bush’s Secretary of Defense speaking about the war in Iraq in Feb. 2002

Twenty-four years later, Rumsfeld’s comment on the Iraq war remains a good way to think about the current conflict in the Middle East, and its impact on the energy sector. In this article we provide a short summary of the Known Knowns (what has happened and its impact on the energy market), and the Known Unknowns (things everyone knows are still to be determined) and how these unknowns impact the energy market. Of course, we cannot provide any information on the Unknown Unknowns. They are, by definition, unknowable, and yet it is these uncertainties that are likely to have the most significant impact on the energy market.

Known Knowns: What Has Happened

A few of the most important known knowns include:

• Extensive damage occurred at the Ras Laffan LNG plant in Qatar. This plant produces 20% of the world’s supply of LNG.
• Crude oil and natural gas fields, midstream processing facilities, refineries and logistics (ports and storage) also sustained extensive damage.
• Shipping through the Strait of Hormuz has virtually stopped. Approximately 20% of the world’s oil products, and 20-25% of the world’s LNG moves through this narrow body of water at the mouth of the Persian Gulf.

Market Impact: What We Are Seeing Now

The conflict in the Middle East had an immediate and dramatic impact on the price of crude oil, related petroleum products and LNG. The price of crude oil and gasoline have risen dramatically in the US and internationally. Because natural gas has largely replaced crude oil as the fuel used to generate electricity, the rise in oil prices does not directly affect the price of electricity. For the electricity and natural gas markets, the increased cost of LNG has had the most significant impact on electricity prices. LNG (natural gas cooled into a liquid so it can be transported by ship) is used to move natural gas to places that do not have sufficient domestic supply. Accordingly, any increase in the price of LNG substantially moves the price of electricity in many energy markets. The graphs below show how LNG and natural gas have traded at three of the largest natural gas trading hubs. Figures 1, 2 and 3 show prices for Northeast Asia’s JKM, Europe’s TTF and Louisiana’s Henry Hub trading hubs. These three hubs are important markets, prior to and after the shutdown of the Ras Laffan LNG facility in Qatar.

Figure 1: Asia JKM Prices Before and After the Ras Laffan LNG Shutdown, CME Group

Figure 2: Europe TTF Prices Before and After the Ras Laffan LNG Shutdown, CME Group

Figure 3: Louisiana Henry Hub Prices Before and After the Ras Laffan LNG Shutdown, CME Group 

Figures 4 and 5 show how wholesale electricity prices in PJM and ERCOT have been trading.

Figures 4 & 5: PJM and ERCOT Wholesale Electricity Prices, April 2025 - March 2026, 5

As you can see from the Henry Hub natural gas graph and the two graphs of forward electricity market prices, electricity and natural gas prices in the US have not shown the same increases. The reason for this is that in almost all US markets, LNG is not important in setting electricity prices. For these markets, the driver is the domestic price of natural gas and there remains an abundance of natural gas in the US. The one exception to this is New England, which relies on imported LNG during the winter months. The linkage to LNG has caused forward natural gas prices in New England and power prices to increase, especially when LNG is most needed – during the winter months.

Known Unknowns: What We Are Watching

A few of the most important known unknowns include:

• When will the conflict end and the ordinary flow of fuel resume through the Strait of Hormuz?
• How significant is the damage to critical energy infrastructure and how long will it take to repair? In particular, when will Ras Laffan’s LNG output return to prewar levels?
• The conflict has ended a long period of relative stability in the Middle East oil market. How will global markets respond to higher levels of political risk in the Middle East?
  • To what extent will oil and LNG importing countries (particularly China) increase stockpiling of natural gas, oil and LNG in reaction to the recent curtailment of supplies from the Middle East?
  • Will South American energy producers like Venezuela start to replace the Middle East as a source for natural gas, oil and LNG?
• Will countries that consume large amounts of oil, natural gas and LNG to generate electricity shift their blend of energy sources and increase their dependence on renewables, nuclear and/or coal?
• Will the increased price of gasoline in the United States force states, faced with energy affordability challenges, to rethink current energy policies?

Potential Impacts:

The energy market already reflects some of these known unknowns. Examples include:

• The value of wind developers and other alternative energy producers has rallied over the past few weeks. Trading in FAN, an ETF of global wind producers, reflects this trend.
• Several states, including California and New York, faced with energy affordability challenges that are exacerbated by high gasoline prices, are reducing clean energy goals. Other states are exploring ways to halt the construction of new data centers to reduce energy demand and lower the price of electricity and natural gas.
• Volatility in crude oil and LNG prices has increased dramatically. If the conflict is not resolved shortly, we can expect increased volatility in winter electricity and natural gas prices in New England.
• Extended shortages in the global supply of oil and natural gas increase the likelihood of an economic downturn, and increase the risk of a wider recession.

The Middle East Conflict - Unknown Unknowns:

It sounds obvious, but we do not know what we do not know. And we have always had to grapple with how to prepare for what we cannot anticipate. Today, however, the world appears to be entering into a period of increased geopolitical risk. The conflict in Ukraine, the situation in Gaza and Lebanon, Iran’s conflict with Israel, the US and a large portion of the Arab world, the breakdown of NATO, and the unpredictability of political leaders, all suggest that while we cannot know the unknowns, we may see more of them in the days, months and years ahead.

For this reason, it is especially important for energy consumers to adopt a risk management approach that considers the risk of unexpected and material changes in the energy market, whether those are driven by the surprises in the Middle East conflict, the next conflict, or another unknown that suddenly materializes.