Weeks of War Are Reshaping Global Gas Market for Years to Come

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1:32Carol Massar:Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, each week, the world's largest liquefied natural gas plant remains shut. The world loses the equivalent of enough energy to power Sydney's homes for an entire year. Qatar's Ross Luffin plant closing earlier this month.

2:14Carol Massar:You know that. We've talked about it. After an Iranian drone attack, the first interruption to supply in three decades of operation. Now, after further hits and retaliation for an Israeli strike on the vast South Paris fields, that happened yesterday. The wider complex has suffered, Tim, what Qatar describes as extensive damage. With more on how weeks of war are reshaping the global gas market for years to come, we head to the Bloomberg News Washington, D.C. Bureau. And to our reporter who covers the LNG market, Ruth Liao joins us. Ruth, I want to talk a little about the infrastructure in the Middle East and the idea that this could shape the global gas market for years to come.

2:53At this point, what has been taken out when it comes to natural gas?

2:58Carol Massar:So this has been a significant development for this ongoing crisis. The latest attacks, as far as we know, have struck the liquefaction facility at Ras La Fonche, the largest on the globe, and really massive equipment that could take much time to rebuild, And that's only presuming that there would be a letup in the conflict. So having all of that uncertainty has really disrupted global markets with end users in Asia and Europe looking at elevated gas prices for time to come. Well, and so I'm glad you went there in terms of what Asia and Europe is watching, because we do talk about distinctions between who is being so served by the region.

3:44Carol Massar:President Trump saying earlier today, we don't use the Strait of Hormuz, and so the U.S. isn't really impacted. Is he completely correct on this? And then there's the reminder that markets are global. So what happens around the world often does happen to possibly impact everybody. Yeah, the U.S. has become the largest LNG exporter, globally overtaking Qatar in terms of production. But this is such a massive supply shock that even with all of the LNG facilities in the U.S. running as much as they can, it's not going to be enough to backfill that deficit. So the impacts that we'll see will have immediate consequences for end users, Southeast Asia, the ones that are looking and using this LNG for industrial and heating purposes, for power utilities.

4:32Carol Massar:You know, will there be changes in demand? This is what experts are expecting will happen because, again, this has been such a sudden supply shock. Ruth, what about Europe? And I think back to the beginning of Russia's invasion of Ukraine and the supply shock that we saw then. And certainly it was in a different time of year when it was set to be cooler than it is set to be in the months moving forward. And that was a big supply shock and really affected Europe's economy. What about the effect on Europe with this shock? Yeah, the distinction, I think, with the invasion of Ukraine is that it was mostly pipeline gas that was dramatically reduced by Europe, and LNG was there to backfill for that lost supply.

5:13Carol Massar:The U.S. stepped up to provide a lot of the LNG cargoes then, and then we saw a redirectional flows. This time around, as you mentioned, storage will be on top of mine for the next few months as storage needs to rebuild, but really if there was a time for this to occur, it's during what traders called the shoulder season, relatively lower in demand before there's the high cooling season for the summer in the northern hemisphere and before there's going to be winter demand as well. Hey, Ruth, one more question before we wrap up here. The story that you've got out on the terminal, you and the team, it's headline weeks of war reshaping global gas market for years to come.

5:52Carol Massar:I mean, this is, you know, where we're trying to get to the timeline of this war and when we can kind of start to not think about the energy shock. But is this something that is going to last and impact these markets for a while, especially maybe it is for the European and Asian markets? Given the uncertainty in terms of the extent of damage, not knowing how long it would take to repair, as I mentioned, this is massive infrastructure, not just in scale, but in terms of the type of technology that's used. It really is clear that I think those will have an enduring impact. It's not even just a matter of clearing the Strait of Hormuz and allowing for the traffic to flow again, but really being able to have the labor, the equipment, the repairs, the workforce, et cetera.

6:36Carol Massar:All of that still needs to be laid out and could take a significant amount of time. Yeah, it maybe makes sense, too, why you're seeing some of the energy equipment companies, the drillers. They're really rallying in today's session because you do think about what kind of demand will be for them in the future. Ruth, thank you so much. Really appreciate it. Ruth Leow joining us. She is Bloomberg News, Washington, D.C. Bureau. She's there. And she, of course, covers the LNG market for us here at Bloomberg. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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9:23Carol Massar:Learn more at chase.com slash business. Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. U.S. Defense Secretary Pete Hexeth confirming that the Trump White House is asking for an additional$200 billion from Congress to pay for the war against Iran, even as earlier this morning he also argued that the campaign was ahead of schedule and disputed that the U.S.

10:09Carol Massar:was getting embroiled in a quagmire. President Trump, though, also addressing the military situation earlier today from the Oval Office, specifically talking about stockpiles. Fortunately, we have a lot. We have a tremendous unlimited supply of what you'd call middle and upper middle armaments and military equipment, munitions, armaments, but munitions in particular. Raytheon is building four factories. Lockheed is building five or six factories. And they're building them fast. They are now building a tremendous... There's never been anything like it, what's taking place right now. So we're in very good shape, but we want to be in the best shape, the best shape we've ever been in.

10:55All right.

10:56Carol Massar:So are we in good shape? We want to ask that of our next guest. Sheila Kaelou is with us. She's Managing Director in Equity Research at Jeffery. She joins us here in the studio. That was President Trump at the White House earlier. He said a lot that we want to unpack with you. Are we in good shape when it comes to munitions? You were in D.C. this week, right? Yeah, we attended a conference called the McAleese Conference. Jim McAleese is an expert in bringing folks from the Department of War together, whether it's Army Secretary, Navy, Air Force, and critical weapon systems. And the theme there, very, you know, clearly all appointed by the administration.

11:31So there's a view there. $1.5 trillion budget is going to come out from the president's request at the end of April and May. That's kind of new. It's delayed. We thought any day now, but we know it's going to be at the end of May, end of April. And they're sticking to their$1.5 trillion. And I don't know how Democrats will align with that. With that, you know, President Trump's comments, I don't know if we're at unlimited stocks of missiles and munitions. But that's one thing that's clear from all the DOD employees is all the Department of War folks is that missiles is the best part of the market in terms of growth to invest in for investors.

12:04And that's why you're seeing, you know, 4x production increases. So what the Department of War has done, working with multiple primes like Raytheon, like Lockheed, is to put forward frameworks on missile production, saying over the next seven years, we'll guarantee you production increases on a Pac-3 missile from 600 units a year to 2 ,000 units a year, which is a big revenue bump. And we will guarantee that for the next seven years. So can you build enough capacity to do that? Can they? Well, they're working on it. And I think that's a theme that the Department of War, more than anything, could align on, whether it's Republicans or Democrats, is that there isn't unlimited supply.

12:46And what we do manufacture from a missile perspective is quite expensive. We're doing it in low quantities, so we have to do it in larger quantities and also find ways of manufacturing cheaper munitions and missiles. The president's comments about what Raytheon is doing, building four factories, Lockheed building five or six factories. Does that align with what these companies have said publicly? Yeah, we're seeing 30 % increases in CapEx for basically 15 % to 20 % of their revenues. We continue to see 8%, even though we're hold rated, 8 % upside in our estimates if Raytheon and Lockheed could actually meet these frameworks.

13:20And those are only three that have been announced thus far. I think you'll see more to come. There's dozens of offensive and defensive missiles. We put out a missile primer today, and folks were emailing me, well, you missed this one. Well, you missed this one. And I was like, well, there's so many opportunities to continue to invest. And I think that's one thing the government will agree on.

13:39Carol Massar:I mean, it's a whole supply chain, right? It's the suppliers. I mean, when you look at it, we obviously talk about the big defense companies, whether it's Lockheed Martin, whether it's RTX. But there's a ton of American companies, right, that are going to be impacted by this. We're trying to find ways that might not be as obvious, that have also really great margins associated with it, and might not have to have the massive capital expenditures without the share repurchases. So like Woodward is a great way to play it. Solid rocket motor providers, you know, even Heiko that does missile components, Elbit in Israel.

14:11So there's a whole slew of ways to play missile defense and offensive missiles.

14:15Carol Massar:So not just U.S., obviously. Yeah. And like, you know, I would say Haumet and Woodward are great ways to play it that traditionally people might not think of. Can I just ask you, what is the supply chain like for defense companies? Is it a global one? No, it's mostly in the U.S. It's U.S., but what the government's trying to do is a dual source in the U.S. So having multiple suppliers because the capacity increases are going to be pretty significant. So I hear you talking about the opportunity that these primes have ahead of them. Yet, as you mentioned, you still have a hold rating on RTX, Northrop Grumman, Lockheed Martin.

14:47What would prompt you to change those to buy ratings? I think the Department of War, one of the things that they've done is has guaranteed the top line, but they haven't guaranteed margins associated with it. On top of that, the primes have to invest their own capital, cut their repurchases in order to invest in the CapEx themselves. So at the end of the day, it doesn't change their EPS algorithm much. It actually keeps it the same, even though they're investing for the Department of War much more. And that was part of the executive order President Trump put in at the start of this year. He said, I'll give you these frameworks.

15:19I'll boost the budget. But we haven't seen margins associated with it. And, of course, some visibility as they finally have five, seven-year contracts should be helpful in margins. then they don't have to renegotiate a contract term every year.

15:31Carol Massar:Having said that, we have an administration that when it identifies something as important to national security, they get kind of more aggressively involved, whether it's the semiconductor space, whether it's rare earths and rare minerals. And I just wonder, is there something more that we would anticipate from the administration, this administration, when it comes to defense companies, whether it's taking a stake, making some further investments? I'm just curious what you are hearing. I think they'll continue to do that, whether it's providing frameworks. So they'll allocate the dollars. So that'll be big contracts.

16:03So the primes will have no choice, but see invest. It won't be, you know, kind of wishy-washy, like we're only going up five, it'll be 600 to 2000. So the CapEx investment is needed is critical. There's a seven year time horizon. So first, we'll see more long-term frameworks. Second, I think you could see some stakes. We've seen some of it already. Of course, these primes don't have infinite capital. And they're already spending a big chunk of their CapEx now associated with missiles. So if there's more and more needed, you could see the government get involved.

16:33Carol Massar:Can I just ask you too, shift to drones, are more drones? I think this war has been a fascinating, well, fascinating is a bad word to use because it is war. We've seen the way that it's fought different than previous wars. Yeah. Is there a shift in terms of the kind of weapons that these companies want to be working on or are working on in the future? Or does that kind of get sidelined as a result of these orders from the government? There's so much going on, right? So with Russia and Ukraine, I think you've seen 70 % of the fatalities associated with drones. But that's not the kind of drone warfare the U.S.

17:06might use. So we'll need more maneuverability, more electronic warfare with drones. But the key, I think, whether it's missiles, munitions or drones, is ability to manufacture it today, readiness and scalability, doing it in the hundreds of thousands, not only 100 or 200 or 2000 units even, which is what we've seen from at least Russia, Ukraine, Iran, is they manufacture missiles in the thousands, not not smaller quantities like we do. How are you looking at magazine depth in the context of comments that we heard from the Secretary of Defense earlier today? He said in the Oval Office, missiles being shot down, shot are down over 90 percent since the beginning.

17:45One way attack drones down over 90 percent since the beginning. The U.S. is going after Iran's industrial base. Does that mean a lot of the munitions that we've used up or have used, those will not be used in the coming weeks or months, depending on how long this goes, just because Iran's capabilities have changed? you know i'm not sure how iran stockpiles look but what we're doing is very expensive um i don't know how much the war is costing but it could be 10 billion in debt so 200 billion more is what yeah so over the last 18 days i mean it's very expensive what we're doing so we have to a theme is like readiness scalability and also affordability we can't manufacture shoot down objects with five million dollar missiles when they have $50 ,000 missiles.

18:29So we have to come up with ways. And that's what's really driven. This administration has been super supportive of startups, the defense tech names in the world. It's led by Andrel. That's more publicly known, but there's a whole bunch of names we cover like Voyager that are out there trying to take a piece of the pie that was previously not given to them.

18:49Carol Massar:Hey, I want to bring in a question from our Wayne Sanders, who we talked to a lot about. He's down in Washington and part of our Bloomberg Intelligence team, but he said, Which programs are most at risk of funding versus revenue due to execution or industrial bottlenecks? That's such an interesting question because I asked Jules Hurst, who's the DOD comptroller, so think of him as the DOD CFO managing about$1.5 trillion. And this week I asked him, what do you think is going to get cut if the Democrats don't approve your$1.5 trillion budget? And he's like, I had a hard time getting to$1.5 trillion.

19:21I had to cut to get there. And I was like, the budget today is$1 trillion for context. So 1.5 is a significant increase. So the Republicans are going for full steam increases across everything, essentially. And I think historically what's been thought of as areas that will be reduced is F-35, a fighter of the past, or helicopter spending. And we're seeing that obviously come into the forefront of conflicts like Venezuela and even Iran, right? We're using older aircraft and the need for it. It's kind of reignited that need. Can you believe we're talking about the F-35 as being something of the past, given how much we spent on it?

19:59For investors, it was something of the past, but it's actually driven a revival in Lockheed stock, which has been leading the primes in terms of performance as we've seen it used multiple times. So it's had a bit of a rebirth. Okay. All right. Do we have time for a quick question on airlines?

20:16Carol Massar:Like, what do we need to know right now? I think, you know, basically this is a month of COVID for airlines in the Middle East. you're seeing capacity cut 80%. So a lot of work is being done on how does that impact global air traffic up 5%, Mideast accounts for 10. How does that hit, number one, global air traffic, global aftermarket demand? And then how does that hit sticker shock for folks buying airline tickets in the US as oil goes to wherever it's going to go? Yeah, we talked about a lot of travelers buying tickets in advance before this stuff kind of hits. I've been doing that. Lock the doors.

20:51Carol Massar:We're not letting her go. We're just going to continue. We're going to, as Tom Keen would say, we're going to rip up the script. You are a gem. Thank you so much. Thanks. Sheila Kayalu, she's managing director and equity research over at Jeffries. Just a must when it comes to defense and airlines. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. Well, global energy markets affecting global markets overall.

21:26It played out too in global bond markets as bonds tumbled worldwide. Investors rushing to bet on higher rates after key central banks signaled fresh concern that the surge in oil prices will deliver an inflation shock. Carol, three weeks into the war, the fallout unleashed a major repricing across markets by dashing once widespread expectations that social banks would cut rates this year to spur growth. It's having big implications.