Iran War Drives Coal Demand As Oil And Gas Supplies Face Disruptions

The disruption of global oil and natural gas supplies caused by the United States-Israel war on Iran is pushing some countries towards coal as they seek to keep electricity systems running amid reduced fuel availability and higher energy prices.

The shift has benefited coal producers, with South Africa's Thungela Resources reporting that its half-year profits doubled. Several Asian countries have also increased coal-fired electricity generation or delayed plans to shut coal plants. According to Al Jazeera, several countries are turning to coal as they respond to the disruption even as governments continue to pursue longer-term plans to reduce their reliance on fossil fuels.

Coal is abundant and relatively cheap to produce, but it is also one of the most polluting fossil fuels. Mining can cause water pollution, while burning coal releases large quantities of carbon into the atmosphere and contributes to global warming.

Global coal consumption was already rising in 2025, with the Eurasia region and the United States using the fuel to power artificial intelligence data centres, according to the World Bank. The Iran war has added further pressure on countries that depend heavily on imported oil and gas.

Here is what is driving the rise in coal use, where demand has increased and what the disruption means for the global clean energy transition.

Why has coal use increased?

The energy disruption followed strikes on Tehran that began on February 28, after which Iran closed the Strait of Hormuz. During peacetime, about one-fifth of the world's oil and liquefied natural gas (LNG) supplies passed through the strategic waterway.

Negotiations to reopen the strait are ongoing.

The closure has reduced oil and gas supplies and pushed oil prices higher. With imported gas becoming more expensive and less readily available, some countries have turned to coal to maintain electricity generation.

Coal prices have also risen, but the fuel remains cheaper than oil and is more readily available.

Asia has been particularly exposed because of its dependence on energy supplies from the Gulf. About 82 per cent of oil and gas shipments through the Strait of Hormuz went to Asia in 2022, according to the US Energy Information Administration. China, India, Japan and South Korea were the top destinations.

The conflict has also affected Gulf energy producers.

Qatar declared force majeure on its delivery contracts in March after Iranian drones struck its Ras Laffan oil facility, the world's largest LNG complex, forcing it offline. State officials said the attacks had knocked out 17 per cent of Qatar's LNG exports by March.

The United Arab Emirates' Das Island LNG terminal, Fujairah oil terminal and Ruwais Refinery Complex have also been attacked. Facilities in Saudi Arabia and Oman have faced strikes as well.

Al Jazeera reported that the disruption has increased pressure on Asian countries to find alternative energy sources as oil and gas supplies remain uncertain.

Where is coal generation rising?

Several Asian countries have responded to the disruption by increasing coal-fired electricity generation or delaying plans to reduce coal use.

An analysis by energy data company Ember found that global coal output could rise by 1.8 per cent by the end of 2026 compared with 2025 under a “worst-case” scenario.

Japan has lifted restrictions on older, high-emission coal plants to deal with the energy shock. South Korea has delayed the shutdown of coal-powered plants it had planned to phase out by 2040.

Bangladesh initially responded to the disruption with power cuts, university closures and rationing of fuel sales to vehicles before increasing coal-fired electricity generation.

Thailand, the Philippines and Vietnam have also increased coal-powered electricity generation to conserve dwindling gas reserves.

In Pakistan, data from the National Electric Power Regulatory Authority showed that electricity generated from imported coal had increased by 90 per cent by July compared with the same period a year earlier.

China and India account for 70 per cent of global coal consumption and are also major producers. In India, electricity demand has been increasing partly because of more intense heatwaves. The government plans to launch several new coal-mining projects that could increase global supplies by 2.5 billion tonnes a year, according to the Global Energy Monitor.

Germany has also said it will not jeopardise electricity generation because of climate commitments it made earlier, while Italy has pushed back its coal phase-out from late 2025 to 2038.

Which coal producers are benefiting?

Indonesia is the world's largest coal exporter by a wide margin, followed by Australia and Russia.

In March, Indonesia reversed previous plans to curb coal production and reduce oversupply as it sought to benefit from higher prices. Coal prices stood at $131.85 per tonne in July, compared with $102.20 a year earlier.

South Africa's Thungela Resources reported that its half-year profits doubled compared with the same period in 2025. The increase was driven largely by higher production at its Ensham mines in Queensland, Australia, as well as stronger demand and higher prices at both Ensham and its South African operations.

Production at Ensham rose by 38 per cent in the first half of the year, during the peak of the conflict, to 2.2 tonnes from 1.6 tonnes in the previous period.

Thungela reported headline earnings per share (HEPS) of 4.80 South African rand ($0.30), compared with 1.92 rand ($0.12) in June last year. HEPS is a primary measure of profitability used in South Africa.

The company said prices were likely to remain high as European and Asian markets prepared for winter.

What does the rise in coal mean for clean energy?

The increase in coal use comes despite international commitments to reduce dependence on the fuel.

At the COP26 climate summit in 2021, more than 40 countries, including Indonesia and Vietnam, pledged to scale back coal use. India and China did not sign the pledge.

Last year, South Korea joined the Powering Past Coal Alliance, which supports coal-dependent economies seeking to transition away from coal.

Nick Hedley, an energy transition analyst at South Africa-based Zero Carbon Analytics, said countries that already have coal infrastructure can increase its use when gas supplies are disrupted.

“For the likes of Bangladesh, it’s easy to lift coal use when global gas supplies are disrupted because the country invested heavily in coal infrastructure in recent decades, and much of that capacity has been sitting idle,” he said.

“Coal becomes cheaper than imported gas when gas prices surge. Importantly, coal still cannot compete with renewables on cost,” Hedley added.

According to Al Jazeera, increases in coal use in some countries are being offset by longer-term declines in coal consumption in places such as Europe.

China's domestic coal production has also fallen this year after the government tightened oversight following a deadly explosion in May at the Liushenyu coal mine, where 82 people died. Beijing has also continued making large investments in renewable energy.

Hedley said the disruption of global fossil energy supply chains could make clean alternatives more competitive and encourage countries to invest in them.

“The lesson here is that Asian countries need to speed up their shift to clean energy and electrification to safeguard themselves against future global crises,” he concluded.

Al Jazeera reported that while some markets are increasing their reliance on coal or delaying phase-outs, longer-term declines in coal use elsewhere and continued investment in renewable energy remain part of the wider energy transition.