By Rebecca Feng
Coal is making a comeback.
Countries around the world are returning to the highly polluting but reliable source of power after the Iran war effectively shut the Strait of Hormuz and cut off around 20% of global liquefied natural gas supplies.
Taiwan is restarting idled coal-fired power plants and South Korea boosted the amount of electricity it generated from coal by more than a third last month. In Europe, Italy has put its coal plants on standby as it girds for a prolonged energy shock.
Spot coal prices at Australia's Newcastle port, a key supplier to Asia, have jumped 12% since the war started. That benchmark briefly topped $140 a metric ton in mid-March, the highest level since late 2024, though far below the $440 reached in the wake of Russia's invasion of Ukraine in 2022.
"Coal is a buffer fuel right now. It is independent of geopolitics relative to LNG. It is a hedge," said Tony Knutson, head of thermal coal markets at consulting firm Wood Mackenzie. "As long as the conflict endures and the strait remains closed, coal will fill that gap."
The return-to-coal trend is the latest sign of how the economic fallout from the conflict in the Middle East is rippling out around the world. It could also have an environmental impact.
Many countries have worked to reduce coal consumption in recent years to combat climate change, and some have looked to generate power from LNG instead. Coal emits around double the amount of carbon dioxide as burning natural gas.
The conflict with Iran means an expected decline in coal demand by the end of this decade will likely now be delayed, Knutson said.
To be sure, not all countries are switching back to coal and analysts don't expect the trend to last in the long term, especially if the Strait of Hormuz reopens and LNG shipments resume.
Most European countries have already diversified their energy supplies and accelerated the development of renewables. But since the war started some Asian countries have started to burn more coal, which many were already reliant on before the conflict.
The comeback has echoes of 2022, when tight gas supplies following the start of Russia's war in Ukraine led countries around the world back to coal in order to keep power flowing to homes and factories. At that time, Europe led the coal purchases, with global competition for the fuel causing a shortage that drove benchmark prices to new records.
This time, the shift back to coal is most pronounced in Asia, where some countries face imminent gas shortages.
Almost 90% of the total LNG volumes exported via the Strait of Hormuz are typically destined for Asia. But since the war started, only three ships with LNG have passed through the crucial waterway. The last Qatari LNG cargo headed for Asia left the Persian Gulf before the war. It arrived in China on March 20.
The moving daily average of Asian LNG imports dropped to a six-year low last month, according to Vortexa, falling to levels last seen at the height of the Covid-19 pandemic.
Taiwan typically generates about half its electricity from LNG and normally sources around a third of the fuel from Qatar.
The island is now restarting two coal-fired power generators, which had been idle for months as it tried to shift away from coal.
In a statement last month announcing the move, Taipower -- the state-run utility company -- referenced the war's impact on international energy markets and the continuing risk to LNG supplies.
Many countries have taken emergency measures to boost coal-fired power generation to "reduce the impact of high natural-gas prices on electricity prices and people's livelihoods," Taipower said.
India has issued an emergency coal directive, essentially forcing power plants that run on imported coal to maximize output ahead of what is forecast to be a hotter-than-normal summer. Electricity demand for air conditioning units is expected to surge, raising concerns about the country's ability to generate sufficient power. In late March, the western state of Gujarat directed utility Tata Power to restart a facility that runs on imported coal.
In South Korea, coal produced 12.1 terawatt-hours of electricity in March and 10.7 terawatt-hours of electricity in April, a 36% and 39% increase respectively from a year earlier, according to Electricity Maps, an electricity data platform.
Meanwhile, Thailand's energy commission has restarted two coal units at one of its power plants as a way of offsetting higher gas costs.
So far, there has been less shifting from gas to coal in Europe. That partly reflects the region's efforts to develop renewable energy sources and diversify its gas imports in recent years. Emitting carbon emissions is also more expensive in Europe than elsewhere.
Still, LNG supply constraints are prompting some countries to reconsider coal, or at least keep the once-dominant fuel source in the mix.
Italy's energy minister said in March that the country's coal-powered plants -- currently on standby -- could be reactivated if the conflict in the Middle East triggers an energy crisis. Italy is one of the most gas-reliant economies in Europe, with natural gas accounting for roughly 40% of its total energy supplies. The country also delayed the phaseout of its coal-fired power plants to 2038.
Last month, German Chancellor Friedrich Merz also raised the possibility of delaying the closure of individual coal plants in the event of a supply shortage.
Either way, analysts now expect global demand for seaborne coal to increase this year, rather than plateau.
"Burning coal instead of gas for most countries is mostly a question of price," said Martin Senior, head of LNG pricing at Argus Media. "Some countries like Japan and South Korea can give priority to gas burn over coal for pollution reasons, but should gas prices remain elevated, they may continue to burn coal instead."
Write to Rebecca Feng at rebecca.feng@wsj.com
(END) Dow Jones Newswires
May 16, 2026 23:00 ET (03:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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