Strait of Hormuz Crisis Propels Global Coal Demand to Record Highs

The Middle East conflict has effectively throttled LNG shipments, driving up natural gas prices and leaving major economies in a precarious position. Japan, India, Bangladesh, South Korea, and China are among those increasing coal reliance to bridge the supply gap. In China, the shift extends beyond power generation, with rising coal consumption now fueling chemical production as oil prices remain elevated.

Production trends provide little relief for climate targets. While global coal output matched record highs in 2025, it is expected to dip slightly in 2026, even as total demand grows by 1.2 percent. India and China, the world’s largest consumers, are projected to see consumption spikes of 4.2 percent and 1 percent, respectively. Compounding this, meteorologists warn that a strong El Niño pattern could further strain power grids across Asia, potentially forcing even greater reliance on coal if hydropower output falters.

European nations are similarly recalibrating their energy strategies. Italy has pushed back the retirement of coal-fired plants by over a decade, and German Chancellor Friedrich Merz has signaled a willingness to restart coal facilities, arguing that strict phase-out plans have become detached from industrial reality. Conversely, the United States remains an outlier. Protected by abundant domestic natural gas and a surge in new solar and wind capacity, U.S. coal consumption is expected to fall by 7 percent this year, though the country remains a significant contributor to global emissions.