US Propane Prices Surge Amid Middle East Conflict

US propane prices in Mont Belvieu, Texas, surged by more than 9.6% Monday morning to multi-month highs as an escalation of the US-Israel conflict with Iran over the weekend squeezed regional liquefied petroleum gas (LPG) supply.

European propane prices also experienced a significant rally, with the northwest Europe propane swap for April climbing to its highest since January 2025, reaching an intraday high of $590 per ton as of 09:30 GMT, a rise of $106 per ton from Friday's close, equivalent to a 22% gain. In Asia-Pacific, the Argus Far East Index (AFEI) paper contract rose by 17% to $657 per ton, up by $95.50 per ton on the day. Saudi Aramco's contract price (CP) paper increased by nearly $50 per ton to $595 per ton, an 8% rise.

The European price rise is the sharpest for a day ever seen. Even during the global COVID-19 pandemic, prices did not climb by more than $50 per ton in a single session, making Monday's surge a stark indicator of how supply risk is being priced in by the market.

Propane's gains are even more striking when compared with movements in other commodities. Front-month Ice Brent crude futures rose by 13% initially before pulling back. Asia-Pacific LPG market participants said physical trading is subdued, as sellers hold back. The conflict has effectively shut the Strait of Hormuz. Asia-Pacific, the world's largest propane-consuming region, relies heavily on Middle Eastern supply, particularly from Iran. Shipping data show Iran was the second-largest exporter of propane to Asia-Pacific in 2025, sending around 9 million tons. This figure reflects only tracked movements, and Tehran operates a shadow fleet that operates outside tracked systems.

China, the world's single largest propane consumer, has over the past year sought to reduce its reliance on US LPG because of deteriorating trade relations and has sought new supply sources. Kpler data show China cut imports of US LPG to 11.5 million tons in 2025, from 17.8 million tons in 2024, filling the gap with greater inflows from the Middle East and other suppliers.

This supply gap arising from the Middle East conflict is compounded by Aramco's force majeure at the Ras Tanura refinery. Europe faces the prospect of the US LPG on which it is heavily reliant being diverted further east. Kpler data show northwest European imports of US LPG have already tightened in recent months, falling by 11% on the year to 578,000 tons in February and pushing the physical premium to a three-year high against paper in that month.

These upward swings could just as quickly reverse if the supply shock fails to materialize. Several factors could reduce the need for Asia-Pacific buyers to turn more heavily to US LPG. On Monday, China's propane dehydrogenation (PDH) plants were expected to cut operating rates by at least 10% in the coming week, which would trim import requirements and soften the effect on global balances.