The International Energy Agency (IEA) reported that military conflict in the Middle East is restricting liquefied natural gas (LNG) transit through the Strait of Hormuz. This supply shock is forcing power producers to switch from gas back to coal.
The IEA reversed its previous forecast for a contraction in global coal trade and now expects the market to grow this year. High natural gas prices are sustaining Japan’s thermal coal demand. South Korea’s coal imports are now forecast to rise by more than 10%.
These developments underscore how regional LNG disruptions create global cross-commodity risks. U.S. natural gas prices fell 1.4% to $2.79/MMBtu on the day despite the tightening global supply outlook.