Four months after the US became the world’s default LPG supplier, the gradual reopening of the Strait of Hormuz is setting up a competition for Asian buyers that will define the VLGC market through the second half of 2026

The conflict reshaped LPG trade flows; the deal will not simply reverse them
Before the conflict, the Strait of Hormuz carried approximately 28% of global seaborne LPG trade, with Middle Eastern producers serving as the primary supplier to Asia’s petrochemical and residential markets. When the Strait effectively closed in late February, the US stepped in. American LPG exports hit record highs, with shipments to Asia surging as buyers scrambled for alternative supply. Four months later, the US-Iran deal is beginning to reopen that route, and the early signs of a Gulf comeback are visible: 10 carriers entered the Gulf in the final week of June, suggesting Qatar is preparing to restart production at North Field, and Middle Eastern oil companies have begun transiting the Strait on their own tonnage. But the market has already been structurally reshaped. US export infrastructure has expanded, new commercial relationships have been established, and Asian buyers have diversified their supply base. The question is no longer whether US LPG can replace the Gulf, but how the two supply sources will compete for the same customers as the Strait gradually reopens.

A geopolitical bottleneck in the East meets a meteorological one in the West
The pace of that competition will be shaped by two separate constraints heading into the second half. In the East, inbound vessel transits through the Strait are running at only 30% of pre-conflict levels, meaning loading capacity in the Gulf remains severely constrained even as cargoes begin to flow outward. In the West, the Panama Canal faces a renewed risk after NOAA confirmed in June that El Niño conditions have developed and are forecast to strengthen into one of the most powerful events on record through the Northern Hemisphere winter. The Panama Canal Authority has already reduced the maximum draft for certain vessels as a precaution, an early echo of the 2023-2024 El Niño drought that cut daily transits by nearly a third and forced vessels to lighten cargo. If that pattern repeats into the fourth quarter, just as Asian winter heating demand for LPG typically builds, VLGCs carrying US cargo could face a second wave of rerouting via the Cape of Good Hope, layering a weather-driven supply constraint on top of the Hormuz-driven one. Canal authorities currently maintain that no transit restrictions are planned through year-end, but the fourth quarter carries the most risk. Either way, the depleted LPG inventories across Asian petrochemical hubs represent a concentrated restocking requirement that will support VLGC freight demand through the remainder of the year.