Coal Extends Rally on Mideast Disruptions

Coal prices surged above $140 per ton, reaching their highest levels since October 2024, as prolonged disruptions to global oil and gas flows stemming from the Middle East conflict pushed power generators in major economies to rely more heavily on coal for electricity. Soaring natural gas prices are driving European countries to increase coal-fired generation despite rising output from renewable sources. European gas futures have climbed to three-year highs after Iran launched attacks on Qatar’s largest LNG export facility in response to an Israeli strike on Iran’s South Pars gas field. In Australia, New South Wales announced a ban on new coal mine applications as part of its net zero targets, further tightening supply. NSW exports most of its thermal coal to power stations in Japan, China, and Taiwan. Meanwhile, Indonesia has moved to allow miners to boost output following the recent price surge triggered by disruptions linked to the Iran conflict.

Coal held above $130 per ton, hovering near its highest levels since November 2024 after Indonesia unveiled plans to prioritize domestic supply as the Middle East war drove prices higher. President Prabowo Subianto’s administration has signaled it will introduce rules to ensure its expanding industrial sector can access cheaper coal before any volumes are exported. Indonesia is the world’s largest exporter of coal for power generation, accounting for roughly 50% of global supply. A prolonged disruption to oil and gas flows through the Strait of Hormuz could force power generators in major economies to rely more heavily on coal for electricity. Coal remains the most carbon-intensive fossil fuel, but despite efforts by environmentalists, financiers, and governments to curb its use, demand has stayed resilient. Global thermal coal demand has increased in each of the past two years, according to the IEA, particularly in India and Southeast Asia.

Coal climbed toward $140 per ton, approaching its strongest levels since November 2024 as fears of prolonged global supply disruptions from the Middle East conflict pushed energy prices higher. Brent crude futures surged back above $100 a barrel after Iran’s new supreme leader, Mojtaba Khamenei, pledged to keep the Strait of Hormuz effectively closed while Tehran intensified attacks on regional oil and transport facilities. US President Donald Trump also said preventing Iran from obtaining nuclear weapons and threatening the Middle East is more important than the cost of oil. Meanwhile, several major energy traders have begun declaring force majeure to customers after Qatar’s LNG shutdown rippled through global gas markets. Supply shocks in oil and gas typically increase demand for fuel switching in the power sector. With many Asian economies reliant on Qatari LNG, the region may be forced to ramp up coal-fired power generation if the disruption persists.