Alexandra MorenoNewcastle coal, the Asian benchmark for thermal coal, jumped more than 9% to $150 a ton at the start of the week, according to Bloomberg data, as fighting around the Persian Gulf choked off energy flows and slowed traffic through the Strait of Hormuz to a crawl. The spike is less about coal supply itself and more about what is happening next door in natural gas markets, where prices have exploded and made coal the cheaper option for power generators scrambling to keep the lights on.
At a Glance
- Newcastle coal prices rose over 9% to $150/ton as gas prices surged
- European gas (TTF) closed the week up 88% from pre conflict levels, at 53 EUR/MWh
- An IRGC drone strike knocked out Qatar's LNG export facility, cutting roughly 20% of global LNG supply
- UBS estimates 73% of oil shipped through Hormuz flows to emerging Asia, with India, Korea and Thailand especially exposed
- Analysts see TTF prices climbing toward the mid 70s or above 100 EUR/MWh if the disruption drags on
Why Gas Prices Are Pushing Buyers Toward Coal
The chain of events started with a kamikaze drone attack attributed to Iran's Revolutionary Guard, which shut down Qatar's massive LNG export terminal. That single facility handles something like a fifth of the world's LNG volume, and there is no easy workaround since the gas has to pass through Hormuz to reach ships. With that route effectively closed and Qatari output at zero, European gas prices tied to the TTF benchmark shot up 88% from levels seen before the conflict began, settling the week at 53 EUR per megawatt hour.
Samantha Dart, global co head of commodities research at Goldman Sachs, wrote over the weekend that her base case assumes Qatari production comes back online by early April. On that assumption, the bank raised its April TTF forecast to 55 EUR/MWh, a level that sits well inside the range where utilities start switching from gas to oil products, roughly 45 EUR/MWh for fuel oil up to 71 EUR/MWh for diesel. Dart's team left its 2027 TTF forecast unchanged at 21 EUR/MWh, suggesting this is viewed as a near term shock rather than a lasting repricing.
The risk cuts both ways on time. If the Qatari outage stretches beyond a month, Dart's note points to TTF prices rallying further, into the mid 70s EUR/MWh, matching where diesel currently trades, to pull in more fuel switching. Should the disruption run longer than two months, she expects TTF could break above 100 EUR/MWh, a level high enough to start destroying industrial gas demand across both Europe and Asia.
Emerging Asia Faces the Sharpest Exposure
UBS analyst Manik Narain flagged a separate but related danger for emerging markets tied to the Hormuz bottleneck. His note estimates that about 73% of all oil shipped through the strait heads to emerging Asia, with India, Korea and Thailand sourcing somewhere between 40% and 70% of their oil supply through that same corridor. Thailand and Taiwan carry added exposure because gas fuels 45% to 60% of their electricity generation, meaning a prolonged squeeze could ripple into industrial and technology supply chains.
Taiwan's situation draws particular attention given its central role manufacturing chips for the global AI industry. Higher power costs there would not stay a local problem; they could feed into costs for chipmakers and, eventually, the electronics and AI hardware that depend on them.
How Long Does This Energy Squeeze Last
Everything hinges on how quickly shipping and production normalize around the Gulf. A short disruption keeps gas prices elevated but manageable, with continued coal switching cushioning the blow. A drawn out standoff risks pushing European gas well past 100 EUR/MWh and spreading price pain through emerging Asian economies that depend on Hormuz for both oil and gas. For now, coal is absorbing the overflow demand, and its price is telling that story plainly.
