The Middle East conflict has had a significant impact on global energy markets, particularly in the Asia-Pacific (APAC) region. The damage to energy infrastructure has led to a near-term surge in thermal coal demand, with an additional 150 million tonnes of cumulative consumption projected through 2030, half of which is expected to occur in 2026. This is primarily due to a liquefied natural gas (LNG) shortfall of 35 million tonnes estimated for this year, forcing gas-dependent utilities to rely on coal-fired power generation. The Ras Laffan facility in Qatar, damaged in the conflict, has triggered force majeure and removed close to 10.2 million tonnes per annum (Mtpa) of LNG supply to Asia, with a partial shutdown expected to extend through late summer. This has tightened regional gas markets and pushed the Japan Korea Marker (JKM) near three-year highs, discouraging some demand and leaving an estimated 35 Mtpa supply gap in 2026 that the region cannot easily replace. The shortfall is increasingly being absorbed through higher coal utilization, with roughly 90 terawatt-hours (TWh) shifting directly to coal-fired power generation. Rystad Energy expects incremental coal consumption in Asia to rise by close to 70 million tonnes in 2026 under a sustained tight gas market scenario, driven not by large-scale new capacity additions but by existing coal-fired fleets running at higher utilization rates. Coal-fired generation across Northeast and Southeast Asia has risen sharply as gas output retreats and global seaborne coal shipments to the region step up materially. Japan’s coal-fired generation grew 11% even as gas output fell 13%, and South Korean and Japanese coal imports are tracking more than 50% and 20% above year-ago levels for May. Across affected economies, the pivot reflects necessity over choice, with coal's supply chain remaining untouched by the conflict. This shift is not a coal comeback but a reality check for APAC's energy transition. LNG price volatility has shifted costs without reversing the move toward cleaner energy, and thermal coal prices have responded to that tightness with cautious buying, stockpiling, and a geopolitical risk premium rather than any structural change. Coal is stepping in when gas prices spike, supply tightens, or mothballed plants are briefly restarted. The response so far remains more contained than in 2022 when disruptions to Russian gas supplies triggered a sharp surge in global coal demand. At the time, renewable capacity additions were limited, and thermal coal inventories across major Asian markets were significantly lower. In contrast, strong coal inventories and record alternate energy availability in India, China, and major Asian countries have prevented the market from becoming as structurally strained this time. Until storage, grid flexibility, and firm low-carbon capacity scale sufficiently to cover peak demand and periods of low wind or hydro output, coal will continue to serve as the system's fallback. Tonmit Talukdar, Analyst, Coal Research, emphasizes that the key signal to monitor is capital allocation on the supply side. Any meaningful move by producers such as Glencore, BHP, Adaro, or Bumi toward new mine commissioning or significant life extensions would indicate a more durable shift in industry expectations. For now, such investment responses remain limited, suggesting producers still view current conditions as cyclical rather than structural. This situation highlights the ongoing challenges in the energy transition, with coal playing a crucial role in maintaining energy security and reliability in the face of supply disruptions and price volatility. The future of coal in the energy mix remains uncertain, but its importance in the short term is undeniable.
