Could Coal, LNG and Fertilizers Emerge as Key Beneficiaries of Supply Shock?

• Strait of Hormuz disruption creates structural supply chain changes: The closure impacts 20% of global crude oil, significant LNG from Qatar, and 20-50% of certain petrochemicals and fertilizers, forcing countries to diversify energy sources and supply chains
• Coal emerges as medium-term beneficiary: Existing coal facilities will remain operational longer than anticipated as countries like Japan and South Korea lose access to Qatari LNG, with Glencore identified as prime beneficiary
• Australian LNG producers positioned for premium pricing: Woodside Energy and Santos offer supply security and are 40% closer to key Asian markets than Qatar, trading at half the valuation multiples of US peers like Exxon and Chevron
• Ammonia and fertilizer markets face supply shock: Northern hemisphere planting season coincides with disruption of 20% of global ammonia supply, with CF Industries up 40% and Woodside's new Texas ammonia facility ramping at opportune timing
• Waiting for entry points on tactical opportunities: The fund is monitoring for potential pullbacks following any Strait of Hormuz peace deal to enter positions in coal, LNG, and petrochemical names that have already appreciated significantly

The closure of the Strait of Hormuz has created significant disruptions across global energy and commodity markets, forcing a fundamental reassessment of supply chain security. In a recent discussion, Samuel Pelaez, President & CEO, and Derek Macpherson, Executive Chairman, at Olive Resource Capital outlined their investment thesis around structural changes emerging from this geopolitical crisis. Rather than focusing on short-term oil trading opportunities, the discussion centered on longer-term behavioral shifts and supply chain reconfigurations that could benefit specific sectors and companies.

The Strait of Hormuz serves as a critical chokepoint for global trade, with approximately 20% of the world's crude oil transiting through the waterway. However, the discussion emphasised that the more significant impacts extend to liquefied natural gas (LNG), petrochemicals, and fertilizers, where certain products see 20-50% of global supply originating from the Persian Gulf region.

Coal: An Unexpected Medium-Term Beneficiary

The immediate impact of reduced LNG availability from Qatar, the world's second-largest gas exporter, has forced energy-importing nations to reconsider their fuel mix. Countries like Japan and South Korea, which have been transitioning toward cleaner LNG as part of decarbonisation efforts, now face significant energy security challenges. Pelaez explained the operational reality: 

"More than an uptick in coal demand, what I think is we're going to have a longer duration of the coal assets in production than previously anticipated." 

The logic is straightforward - if new LNG-fired facilities cannot secure reliable fuel supplies, there is no economic incentive to decommission existing coal-fired power plants.

Glencore emerged as the primary investment vehicle for this thesis. The company operates some of the largest thermal coal mines globally and controls approximately 30% of the seaborne coal trade. Notably, Glencore expanded its coal portfolio by acquiring Teck Resources' coal assets in 2024, positioning itself just before the Strait crisis. Coal represents about 30% of Glencore's EBITDA, and the stock has demonstrated resilience, trading near multi-year highs despite broader market volatility.

An additional consideration for Glencore is its commodity trading division, which historically benefits from supply chain disruptions. 

Australian LNG Producers: Geographic and Strategic Advantages

While LNG supply disruptions might seem to benefit all non-Qatari producers equally, the discussion highlighted specific advantages for Australian companies serving Asian markets. Australia ranks as the world's third-largest gas producer and a significant net exporter, with traditional gas basins providing production stability.

Australian LNG producers Woodside Energy and Santos Ltd. emerged as the primary focus. The company supplies LNG to Japan and South Korea and is approximately 40% closer to these markets than Qatar, reducing shipping costs and insurance premiums. Despite these advantages, Woodside trades at roughly half the valuation multiple of US integrated majors like ExxonMobil and Chevron.

The pricing mechanism for LNG provides further upside. While some contracts are long-term fixed, a portion trades on rolling three-to-six-month spot terms. Pelaez explained that while benefits won't appear in the first-half 2026 reporting period, second-half results should reflect current elevated pricing being locked in for 90-day forward contracts.

Petrochemicals and Fertilizers: Ammonia Supply Constraints

Beyond energy, the strait disruption has impacted critical industrial inputs. Approximately 20% of global ammonia production which is essential for fertilizer manufacturing originates from the Persian Gulf region. The timing proves particularly significant as the Northern Hemisphere enters planting season, with reports already emerging of reduced corn planting due to fertilizer shortages.

CF Industries, identified as the largest US ammonia producer, has responded dramatically to these supply constraints, with its stock appreciating approximately 40% since the Strait closure. However, this sharp move places the company in the "watch for retracement" category rather than immediate buy territory.

Woodside's strategic positioning extends beyond LNG to include a recently acquired ammonia facility in Texas entering production at what Pelaez described as "the perfect time." This diversification into the US supply chain provides both geographic diversification and exposure to multiple supply-constrained commodities.

The investment team acknowledged the complexity of the petrochemical space, with Pelaez noting: 

"Being a petrochemical and fertilizer expert takes like three lifetimes because there's hundreds of products with hundreds of different supply chains." 

This complexity led them to focus on larger, more liquid reference commodities and companies where supply disruption would materially impact financial performance.

Supply Chain Security: A Structural Shift

An underlying theme throughout the discussion centered on supply chain security as a lasting change in procurement behavior. Macpherson emphasised this point: 

"When you're looking at your supply chain, you're going to have more confidence buying from the US than buying something out of the Strait of Hormuz. I think there were a lot of people who were passive on that and underestimated the risks of that Strait closing."

This shift toward security-of-supply considerations, even at higher costs, represents what the team views as a structural rather than cyclical change. Countries reliant on Persian Gulf imports will likely diversify suppliers and potentially accept premium pricing for geographically or geopolitically safer alternatives.

Equinor, Europe's largest non-Russian gas producer, was mentioned as a beneficiary of similar dynamics in European markets. Operating outside EU pricing regulations as a Norwegian company, Equinor can sell at international reference prices while providing supply security to Northern European markets.

Investment Approach and Timing Considerations

The discussion concluded with tactical considerations around entry points. Despite conviction in the long-term thesis, the team emphasised discipline around valuation and timing. Pelaez articulated their framework: 

"We always separate the liking of the company from the buying of the company, those are two separate events."

Several names mentioned including CF Industries, Nutrien, and LyondellBasell in petrochemicals have appreciated 30% or more placing them outside comfortable entry ranges despite fundamental tailwinds. The team anticipates that any diplomatic resolution or temporary reopening of the Strait could trigger profit-taking, providing entry opportunities for long-term investors.

Macpherson noted the asymmetric nature of geopolitical risk: 

"If we know anything about global conflicts and geopolitics, these tend to be longer-term events. The risk comes on very quickly and the risk comes off very slowly. So the equity pricing doesn't necessarily match the risk change."

This framework suggests that even temporary de-escalation could create buying opportunities in companies positioned for structural, multi-year supply chain shifts.

Investment Thesis

• The closure of the Strait of Hormuz disrupts roughly 20% of global crude oil flows and 20–50% of supply for certain petrochemicals and fertilisers, forcing energy-importing nations to fundamentally reassess where and how they source critical commodities.
• Countries that had been transitioning away from coal toward LNG-fired power generation now face a supply vacuum that cannot be quickly filled, meaning existing coal infrastructure will remain operational for longer than energy transition timelines previously assumed.
• Australian LNG producers hold a structural geographic advantage over Persian Gulf suppliers, sitting approximately 40% closer to major Asian import markets, with lower shipping costs and insurance premiums reinforcing their competitiveness during a period of elevated demand.
• The disruption has arrived at the worst possible moment for global fertiliser markets, with the Northern Hemisphere planting season coinciding with the removal of roughly 20% of global ammonia supply, creating acute shortages and sharp price appreciation in key agricultural inputs.
• Supply chain security has emerged as a structural procurement priority rather than a secondary consideration, with buyers increasingly willing to pay a premium for geographically or geopolitically stable supply sources.
• Equity markets in this space have already priced in near-term benefits for several names, making valuation discipline critical; any temporary de-escalation or diplomatic development could trigger profit-taking, creating more attractive entry points for investors with conviction in the long-term thesis.
• The petrochemical and fertiliser complex spans hundreds of products and supply chains, making targeted exposure through large, liquid reference commodities and diversified producers the most practical approach for capturing the disruption thesis without excessive idiosyncratic risk.

TL;DR

The Strait of Hormuz disruption has created investment opportunities across coal, LNG, and petrochemicals that extend well beyond the immediate crisis. Glencore offers exposure to extended coal demand and trading profits from market disruption. Woodside Energy and Santos provides a discounted entry point to Australian LNG production with additional ammonia exposure, trading at significant discounts to US peers despite geographic advantages. The fertilizer and petrochemical sectors face supply constraints during peak demand, though many stocks have already priced in near-term benefits. The investment thesis rests on structural changes to supply chain procurement emphasising security over cost optimisation, a behavioral shift likely to persist regardless of near-term geopolitical developments. Disciplined investors may find optimal entry points following any diplomatic de-escalation that triggers short-term profit-taking in names that have already appreciated significantly.

_{*Hero Image - U.S. Energy Information Administration, CC0, via Wikimedia Commons}