Global energy supply chains are facing severe challenges as military conflicts in the Middle East escalate abruptly, driving thermal coal prices to surge to their highest level in over a year. On Monday, the Asian benchmark Newcastle coal futures price jumped approximately 9.3%, reaching the $150 per ton mark, setting a new record high since November 2024. Simultaneously, the European market reacted sharply, with Rotterdam coal prices rising about 13% to $119.50 per ton on March 2, hitting a new 52-week high.
The primary trigger for this price volatility is the supply disruption to key natural gas infrastructure in the Middle East. Due to military actions by Iran in the region, Qatar, which accounts for roughly 20% of global liquefied natural gas (LNG) supply, was forced to shut down its largest LNG export facility at Ras Laffan. This marks the first complete operational halt in the facility's 30-year history. This situation has prompted buyers to actively seek alternative solutions; if the shutdown persists for an extended period, they will consider increasing power generation from coal-fired plants.
The de facto obstruction of shipping through the Strait of Hormuz has exacerbated the already tight natural gas market, causing gas prices to double within a short period. This extreme price premium is forcing the global power sector, particularly in energy-import-dependent regions like East Asia and the European Union, to rapidly implement "fuel switching" strategies. This involves shifting power generation demand from expensive and scarce natural gas to coal, thereby creating strong support on the demand side.
While demand surges, tightening supply expectations are also contributing to the rise in coal prices. Indonesia, the world's largest exporter of thermal coal, recently announced plans to cut its 2026 production targets. This news has significantly heightened market concerns about long-term supply capacity amid the current turbulent situation.
Analysts note that this represents the most significant external shock to the global coal market since the Russia-Ukraine conflict in 2022. Given that the energy shortfall is difficult to fill in the short term, bullish sentiment remains strong. A scenario of high volatility and elevated prices is expected to persist until the situation becomes clearer.
Separately, crude oil prices have also surged to nearly $120 per barrel due to production cuts by Gulf oil-producing nations. Natural gas prices have climbed as well. European gas prices rose by up to 30% on Monday, while Asian spot prices have doubled over the past week and remain elevated.