Iran War Threatens Supply Helium. What this means for the markets

A war in the Middle East could pose a threat to the semiconductor industry and other sectors that rely on a resource produced in the Gulf – helium.

Helium is a less familiar but important input in many industries, most notably technology. In semiconductor manufacturing, its cooling properties are used to transfer heat. Helium is indispensable in photolithography, the technique used to print each chip’s complex circuitry.

The US Geological Survey estimated that Qatar produced more than a third of the world’s helium supply before the war. Recently, however, operations at Qatar Energy’s Ras Laffan Industrial City — the world’s largest liquefied natural gas export facility, which produces helium as a byproduct — were halted after it was hit by an Iranian drone early in the war. On Wednesday, Iranian missiles crippled the plant.

A global helium shortage is causing ripples across several industries.

According to a report by the Chief Investment Office of UBS Global Wealth Management, “Qatar makes around 30% of the world’s helium – a key input for semiconductors, industrial production and medical imaging – while several key elements for fertilizer production move through the strait”. “Any prolonged disruption will not only affect energy prices, but food prices and industrial production.”

A known chokepoint

Helium supply is always a risk. The Semiconductor Industry Association warned that disruptions to helium supply in 2023 could cause “shocks to the global semiconductor manufacturing industry”.

Today, a prolonged “protracted regional conflict could disrupt chipmakers’ production operations regarding sourcing materials such as helium and bromine,” Ray Wang, a computer memory analyst at SemiAnalysis, told CNBC. “For now, the impact appears to be limited. However, prolonged conflict may eventually lead to disruptions or require adjustments in the sourcing of key materials.”

South Korea and Taiwan, two of the world’s largest semiconductor manufacturers, are particularly vulnerable to Middle Eastern helium supplies.

In 2025, South Korean manufacturers will purchase 55% of their helium from the countries of the Gulf Cooperation Council, a confederation of six Arab nations. Taiwan will buy 69% of its helium from the GCC in 2024, according to a Wednesday report from analysts at Barclays.

The effective closure of the Strait of Hormuz has increased helium prices by limiting supply. Bank of America estimated in a note last week that spot helium prices rose by 40% depending on the market. On Monday, Phil Kornbluth, president of Kornbluth Helium Consulting, told CNBC that prices have increased by 70% to 100%, in some cases in little more than a week.

Semiconductors are at the ‘top of the pecking order’

If helium supplies run low, allocations are determined by how critical the gas is.

“Helium demand is concentrated in high-value, mission-critical applications including semiconductors, aerospace, electronics manufacturing and medical imaging,” Bank of America analysts said. “In these end markets, supply security is typically prioritized over price, particularly during periods of tightness. This dynamic has historically allowed suppliers to move to lock in long-term supply during periods of disruption to drive up prices.”

Semiconductors, considered a critical industry, “is at the top of the pecking order,” Kornbluth said. Less important industries – think party balloons – can go down without any allocation.

Still, Kornbluth said even the semiconductor industry would be hard-pressed to fully recover from the effects of a helium shortage.

“Everybody feels it to some degree during that transition period,” he said, adding that buyers at the front of the line will also see price increases. “The industrial gas industry — they don’t play favorites to a large degree there. I mean, they do their best to supply everybody or supply them as well as possible, but there’s a price.”

The length of the war

Closing the strait could take about 27% of the world’s helium offline, and any shortage would have knock-on effects, Kornbluth said.

“Spot prices cover a small slice of helium sales as it is mostly a long-term contract business. So even though it makes for good headlines, it doesn’t impact the market much,” said an adviser who has been in the business for more than 40 years. “Leasing prices haven’t moved yet.”

That could soon change, however, as long-term shortages pressure suppliers to declare force majeure on their contract customers.

Kornbluth said that perhaps the helium market has been “oversupplied for the past couple of years and has been subject to this shortage.” However, it takes at least five weeks to resume production after any ceasefire.

Past oversupply acts as cushion insurance against current shortages. As a result, the shortfall in supply today is probably closer to 15% than 30%, Kornbluth said.

Kornbluth said that if hostilities “end very quickly — there’s a cease-fire in a couple of weeks, and (it) turns out to be a four-month kind of standoff — then I would refer to that as a significant crisis in a period of abundant excess.” “When we’ve had shortages in the past, people have generally made good money in those periods because the impact of the price increase on their entire customer base offsets the loss of volume due to losing supply from Qatar. So it’s generally a positive event for the industry.”

Producers are insulated

In their note, Bank of America analysts struck a similar tone, writing that the Qatar disruption could tighten the helium market, given the length of the conflict and any subsequent recovery. Diverse sourcing and inventories on hand mean major industrial gas producers are relatively well protected from direct supply disruptions, the bank said.

“Helium typically represents a low- to mid-single-digit percentage of gas company revenues, and so we suspect the outage in Qatar will be a neutral to modest net positive event for earnings, assuming it continues for a few weeks. Prolonged outages are likely to be more earnings upside,” Bank of America wrote. “It will take time for the finally restarted Qatar LNG complex to normalize operations, but we suspect helium inflation will ease quickly.”

Other Wall Street banks, including Deutsche Bank, Wells Fargo and JP Morgan, have recently pointed to the tightening helium market as a positive catalyst for industrial gas suppliers. Linde. Last week, JPMorgan analyst Jeffrey Jekouskas upgraded Linde, up 15% ahead to Wednesday in 2026, versus a 3% decline in the S&P 500.

Air products and chemicalsAnother big gas producer, up 14% this year. Wells Fargo analyst Michael Sisson upgraded the stock to overweight last week, saying the Allentown, Pennsylvania-based manufacturer would benefit from increased helium prices.

— CNBC’s Arjun Kharpal and Dylan Butts contributed to this report.