LNG Prices Are Up a Third Since the War Began. Here's What It Means for Your Portfolio.

Oil has gotten most of the attention this year. Crude prices are up more than 60% this year to over $100 a barrel due to the war with Iran and its impact on oil supplies out of the Persian Gulf.

However, the war is having an equally massive impact on the global liquified natural gas (LNG) market. Before the war, 20% of global LNG supplies passed through the Strait of Hormuz each day. Until recently, no LNG carrier had left the Persian Gulf since the conflict began, driving prices up by a third. Here's a look at what this means for your portfolio.

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Filling the gap

The Middle Eastern nation of Qatar is a global leader in LNG. Qatar's North Field is the largest non-associated natural gas field in the world, accounting for about 10% of the world's known gas reserves. The country has spent decades developing this resource by building LNG facilities. It currently operates 14 trains with an annual capacity of 77 million tonnes, or about 20% of global supplies. Qatar currently isn't exporting LNG due to the closure of the Strait of Hormuz. Further, Iran attacked and damaged two LNG trains (U.S. oil giant ExxonMobil owns an interest in both facilities), which will take three to five years to repair.

The war has created a massive LNG supply gap, which U.S. LNG exporters are currently filling. U.S. LNG exporters are on pace to load a record 32.2 million metric tons of LNG during the first four months of this year, a 28% increase from last year. They're on track to ship over 7 million metric tons this month, completely offsetting the 6.9 million tons of displaced supply from Qatar.

Venture Global's (NYSE: VG) Plaquemines LNG terminal has played a crucial role in helping supply the world with much-needed LNG. It loaded almost 6.5 million tons of LNG in the first quarter, a 240% increase from last year. Meanwhile, Cheniere Energy's (NYSE: LNG) Sabine Pass terminal accounted for a quarter of all U.S. LNG exports in the first quarter (7.9 million tons). Additionally, ExxonMobil and QatarEnergy recently shipped the first LNG cargo from their Golden Pass terminal on the U.S. Gulf Coast.

What this means for your portfolio

The war-fueled surge in LNG prices will affect companies operating in countries that rely on LNG to fuel their economies. China, Japan, India, and Europe are among the biggest global LNG import markets. Last year, Europe's LNG imports soared 30% as the continent continued to reduce its reliance on Russian natural gas. Europe was the primary destination of U.S. LNG exports this year (72% of the total). Utilities and large manufacturers across Europe and Asia will feel the impact of higher LNG prices this year, eroding profit margins.

While the stock prices of companies tied to LNG and energy consumption in Europe and Asia will take a hit, U.S. energy companies will get a notable boost. LNG operators Venture Global and Cheniere will deliver higher earnings from the combination of increased volumes and LNG pricing on non-contracted volumes. In addition to the near-term impact of the supply disruption, these companies should benefit from higher future demand as countries seek to diversify their supply away from the Middle East. That should enable them to approve additional capacity expansions in the coming years.

Meanwhile, natural gas pipeline operators will see higher volumes this year. For example, leading U.S. gas pipeline company Kinder Morgan (NYSE: KMI) got a war-fueled boost in the first quarter. Natural gas transportation volumes jumped 8% in the first quarter, primarily due to LNG deliveries on the Tennessee Gas Pipeline. Kinder Morgan also noted that it expects the supply disruption in the Middle East to drive additional demand for U.S. LNG, creating more opportunities to expand its gas pipeline infrastructure.

LNG: The overlooked energy trade

Most investors have focused on the impact the war is having on the oil market. However, it's having an equally meaningful impact on LNG. Major LNG importers will feel the pinch of higher prices while U.S. exporters are seeing a boom. LNG terminal operators and gas pipeline companies should continue to benefit long after the war ends as LNG importers seek to source more of their volumes from the U.S. That makes them compelling long-term investment opportunities.

Matt DiLallo has positions in Kinder Morgan. The Motley Fool has positions in and recommends Cheniere Energy and Kinder Morgan. The Motley Fool has a disclosure policy.