Hormuz Crisis Is Rewriting the Global LPG Trade
- The closure of the Strait of Hormuz has severely disrupted Middle Eastern LPG exports, tightening global propane supplies, driving prices higher, and accelerating a shift toward U.S. exports.
- The U.S., now the world's largest LPG exporter, is increasingly replacing Gulf supplies, with major importers such as India turning to American propane amid geopolitical uncertainty.
- Private commodity traders with flexible shipping fleets, including BGN Group, are emerging as key beneficiaries by rerouting LPG flows and maintaining supply chains during the Hormuz disruption.
The Strait of Hormuz, the Middle East’s main choke point, is effectively closed as Iranian attacks on vessels continue, and the ripple effect is tearing through global supply chains. While crude oil and natural gas disruptions have grabbed headlines, liquefied petroleum gas (LPG) also finds itself at the center of the crisis. The United States leads the world in LPG exports by a wide margin. However, the Gulf countries remain a critical supply center: Saudi Arabia, the UAE, and Qatar are all major LPG exporters currently cut off by the closure.
The traditional LPG supply chain, which cuts across the Middle East, is challenged by rising US exports and mounting geopolitical turmoil. But a key question remains: who can keep LPG flowing while the world’s most critical energy bottleneck is under pressure?
The strain on the LPG market from the Iran conflict has been visible. Exports from Saudi Arabia, Qatar, the UAE, and even Iran (whose tankers were recently turned back by the US Navy’s blockade) have slowed significantly since the war began. Before the war, roughly 54 oil, chemical and LPG tankers passed daily through Hormuz. During the height of the conflict in early March, propane prices from the Texas Gulf Coast rose to almost 10%, reaching new highs as supply tightened due to the strait’s closure. By late May, traffic had plummeted to an average of 11 vessels per day, and by mid-June the cost of propane per gallon was up roughly 25% from pre-war prices in February. The conflict has exposed the vulnerability of overreliance on a single choke point while emphasizing the importance of agile private traders who can find alternative routes to keep hungry markets fed and supply chains stable. The lower risk and potentially lower insurance costs associated with US export flows, as opposed to those from the Arab Gulf, have realigned the logistics of LPG trade.
The United States climbed to the top as the world’s leading LPG producer thanks to the shale revolution of the 2000s, which drove such a drastic increase in propane and butane that domestic demand couldn’t absorb it all. In the 2010s, the US flipped from propane importer to exporter, ultimately becoming a powerhouse driving global LPG trade.
While a mere four countries supply around 60% of the world’s LPG, most of the global population depends on imports: Asia, Europe, most of South America, and several African countries are all net importers with growing demand for cleaner fuel used in cooking, heating, and transportation.
As the need for cleaner fossil fuels grows, analysts project steady expansion in the LPG market. Propane volumes are increasing to over 213 million mt in 2026 and are projected to reach 260 million mt by 2031. Interestingly, Asia is taking in an oversupply of LPG this year in the wake of increasing shipments, a large part coming from the United States. India, which has traditionally imported LPG from the Middle East, is now shifting toward American propane.
Beyond the Middle East and the US Gulf Coast trade flows, sanctions on Russia following its invasion of Ukraine have also reshaped the market. Historically a key LPG supplier to European and Mediterranean markets, Russia has seen EU sanctions push its trade flows elsewhere; and Europe toward more US imports.
At the same time, the US ramps up exports, and the global LPG market continues to expand; private commodity traders are the ones physically moving supply. LPG-focused trader BGN Group was reported to be the largest offtaker of US-sourced LPG in 2025: the firm operates globally, runs its own fleet, and manages over 10 million mt of LPG annually through a US subsidiary in Houston. Other key players include Petredec, a significant buyer of American LPG, and Mitsui, the Japanese trader supplying rapidly growing markets in the Far East. In times of conflict and severe market disruption, commodity traders with large, flexible fleets are crucial to keeping supply chains afloat.
In the midst of geopolitical confusion and an unstable outlook on Middle Eastern trade routes, what is abundantly clear is the US’s emergence as the world’s leading LPG supplier. The market for propane and butane is evolving fast, with the traditional apparatus being rewritten. Traders aligned with US supply chains and operating in high-demand markets, BGN Group foremost among them, are best positioned to benefit from this realignment in the coming years. While geopolitical factors create major disruptions in trade, it’s the private sector, and partners like BGN, that can provide solutions and reinforce stability when the seas get rough.
By Jose Chalhoub for Oilprice.com
