Crude oil holds above $105 as Strait of Hormuz disruptions tighten supply; coal near 3-year highs

Crude oil prices have remained above $105 per barrel for the past two weeks, with escalating tensions between the US and Iran and disruptions to shipping through the Strait of Hormuz keeping global energy markets on edge. Coal futures, meanwhile, are trading near three-year highs as elevated liquefied natural gas (LNG) prices make coal a cheaper alternative for power generation.

Crude oil was holding around $107 per barrel as markets assessed the possibility of a further escalation in the West Asia conflict. With no resolution in sight between Washington and Tehran, concerns over supply disruptions continue to support prices.

The Strait of Hormuz remains a key area of concern for energy markets. According to commodity analytics firm Kpler, crude oil flows through the waterway have declined sharply. Daily passage averaged 16-17 million barrels in September, but the average for October has fallen below 10 million barrels per day.

Developments in Saudi Arabia are also being closely watched, with reports of missile and drone interceptions and attacks affecting energy infrastructure and other locations. Reports of a drone attack on Saudi Aramco's headquarters have also emerged, although an official statement from the company was awaited.

Saudi Arabia's oil production has recovered by around 2 million barrels per day to approximately 8.73 million barrels per day. However, output remains below pre-war levels, highlighting the continuing impact of the conflict on regional energy supplies.

An agreement allowing Russian diesel supplies to reach the US and other markets for the next six months has done little to ease concerns. Market participants expect the additional volumes to have a limited impact on overall supply.

Coal prices rise as LNG remains expensive

The surge in crude oil and LNG prices has also supported coal prices. Coal futures are trading around $150 per tonne, close to three-year highs, as buyers look for relatively cheaper alternatives to natural gas.

Coal costs are nearly 80% lower than LNG, making it an attractive option for some energy consumers when gas prices remain elevated. The International Energy Agency (IEA) has also indicated that global coal demand could reach a record high in 2026.

Dollar and US inflation data in focus

Beyond energy prices, investors are monitoring the US dollar, which is trading near levels last seen in April 2025. Concerns about global growth, rising debt levels and the prolonged West Asia conflict are adding to uncertainty across financial markets.

The International Monetary Fund has flagged risks to global growth, while questions around the sustainability of the artificial intelligence-driven market rally and mounting debt pressures are also drawing attention.

The next key trigger for markets will be US inflation data. The reading could influence expectations for the Federal Reserve's interest-rate outlook and drive movements in the dollar and other asset classes.

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