Key Takeaways
Newcastle thermal coal prices jumped 12 percent since late February, pushing past $140 per tonne after the closure of the Strait of Hormuz cut global liquefied natural gas supply by a fifth.
"Coal is now a buffer fuel, a hedge against geopolitical risk," Tony Knutson, head of thermal coal markets at consultancy Wood Mackenzie, said. "As long as the conflict continues and the strait remains closed, coal will fill the gap."
The disruption has halted roughly 7 million tons of LNG per month, primarily from Qatar, with about 90 percent of it normally destined for Asia. In response, South Korea’s coal-fired power generation increased 39 percent year-over-year in April, while Taiwan’s state utility restarted two previously decommissioned coal units.
The supply shock has created a new geopolitical reality where Iran is now controlling passage through the strait, negotiating transit for select partners like Iraq and Pakistan. For energy markets, this raises questions about long-term supply security and could delay the previously expected decline in global coal demand.
The conflict in Iran has effectively sealed the world’s most critical energy chokepoint, stranding about 20 percent of global LNG supply. With Asian economies overwhelmingly dependent on this route, the pivot to coal has been swift. Data from platform Vortexa showed Asian LNG imports fell to a six-year low last month.
India issued an emergency directive to maximize output from plants using imported coal, while Thailand’s energy commission restarted two coal units at a power plant to offset high natural gas costs. Even European nations are preparing for a potential return to coal; Italy’s energy minister said mothballed plants could be restarted if the crisis deepens, and Germany’s leader has floated delaying planned closures.
The disruption is a boon for U.S. LNG exporters and vessel operators. Cheniere Energy, the largest U.S. exporter, raised its full-year 2026 earnings guidance by $500 million, citing higher production and stronger margins. The company shipped a record 187 cargoes in the first quarter.
“What we sell at Cheniere is access to a secure, reliable, and affordable product,” President and CEO Jack Fusco said, highlighting the increased demand for dependable U.S. supply.
The turmoil has also sent LNG shipping rates soaring. Flex LNG reported that spot charter rates for its vessels jumped from around $30,000 per day in February to over $250,000 in March. The company raised its full-year revenue guidance by 10 percent, citing the strong spot market and new contracts secured in the wake of the crisis. The company’s CEO confirmed that none of its 13 vessels have been trading inside the Strait of Hormuz.
This article is for informational purposes only and does not constitute investment advice.
