- Newcastle 6,000 financial contract falls $8/t before partial recovery
- LNG supply recovery expected to take months despite ceasefire
The potential reopening of the Strait of Hormuz triggered sharp volatility across global energy markets, with coal, LNG, and oil prices initially falling sharply before partially recovering later in the trading session.
In the coal market, Newcastle (NEWC) 6,000 kcal/kg NAR financial contracts fell by as much as $8/t at the market opened before recovering some ground. The Q3 2026 contract ultimately closed $4.50/t lower versus 5 May at $137/t, after touching an intraday low of $133/t.
In the physical market, FOB Newcastle 6,000 NAR spot coal was assessed at $133/t, down $2/t compared to 5 May, while FOB Newcastle 5,500 NAR spot prices also declined by $2/t to $98/t. Meanwhile, FOB Richards Bay 6,000 NAR spot coal was assessed at $112/t, lower by $1/t w-o-w. The Richards Bay 6,000 NAR Q3 2026 financial contract also eased by $2/t to $112/t.
LNG markets also experienced significant volatility.
- Spot LNG delivered into North East Asia rose to $18.13/MMBtu
- June LNG contracts into Northwest Europe fell by $2.31/MMBtu versus 5 May to $15.75/MMBtu
Meanwhile, Brent crude prices dropped sharply.
The July Brent contract fell 7.7% versus 5 May to $101.80/bbl, after hitting an intraday low of $96.75/bbl during morning trading.
Underlying drivers
1. Markets react to potential Hormuz reopening
The sharp price swings reflect the extreme uncertainty that has dominated energy markets in recent weeks. The Hormuz crisis had previously driven coal, LNG, and oil prices sharply higher as traders priced in the risk of prolonged supply disruptions across the Persian Gulf. News of a potential reopening triggered an immediate wave of selling across energy commodities. However, the subsequent recovery in prices later in the session indicates that market participants do not view the situation as a straightforward return to normal conditions.
2. LNG supply recovery expected to be slow
Despite the easing of immediate shipping concerns, LNG production recovery is expected to take significantly longer. Market participants believe that infrastructure damage across parts of the Persian Gulf energy system could take months to fully repair.
As a result:
- LNG exports are unlikely to return quickly to pre-crisis levels
- Global gas markets may remain structurally tight
- Coal continues to retain support as the marginal power generation fuel across Asia
This explains why the initial selloff in coal markets later moderated.
3. Chinese spot prices continue to firm
Chinese thermal coal prices continue to show underlying strength despite broader market volatility.
This suggests that medium-term fundamentals remain constructive, supported by:
- Seasonal summer restocking demand
- Tight Indonesian supply
- Continued coal demand from Asian utilities
The resilience in Chinese prices indicates that the earlier selloff in seaborne coal may have been excessive relative to underlying physical fundamentals.
Outlook
Coal forward curves may face additional downside pressure in the near term as markets continue to digest developments surrounding the Hormuz situation.
However, the broader medium-term outlook for seaborne thermal coal remains supportive.
Key supporting factors include tight Indonesian export availability, persistent import demand from India and China, a potentially prolonged recovery period for LNG production and exports
These factors are expected to continue supporting thermal coal prices even if short-term financial market volatility persists.
In the near term, NEWC and Richards Bay financial contracts: Neutral to negative bias and NEWC 5,500 NAR market: Neutral to negative following the recent sharp rally
Over the medium term, however, the market outlook remains positive due to ongoing structural tightness in global energy markets.
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