The ongoing conflict in the Middle East is reshaping global energy markets, prompting a renewed reliance on thermal coal across the Asia-Pacific region as disruptions to liquefied natural gas (LNG) supplies tighten fuel availability.
According to energy research firm Rystad Energy, the damage to key Gulf energy infrastructure is expected to trigger an additional 150 million tonnes (Mt) of thermal coal consumption across Asia-Pacific by 2030. The increase is being driven by a projected LNG supply shortfall of 35 Mt in 2026, forcing power producers to turn to coal as an alternative fuel source.
Qatar LNG Disruption Creates Regional Supply Gap
A major factor behind the shift is the partial shutdown of Qatar’s Ras Laffan LNG facility following conflict-related damage. Rystad Energy estimates that the disruption has removed approximately 10.2 million tonnes per annum (Mtpa) of LNG supply from Asian markets after force majeure provisions were invoked.
The outage, expected to continue through late summer, has tightened gas supplies across the region and pushed spot LNG prices close to three-year highs. Analysts estimate that Asia could face a supply deficit of around 35 Mtpa in 2026, resulting in nearly 90 terawatt-hours (TWh) of electricity generation shifting from gas to coal-fired power plants.
As a result, coal consumption in Asia is projected to rise by nearly 70 Mt in 2026 under a prolonged gas shortage scenario. The increase is expected to come primarily from higher utilisation of existing coal-fired facilities rather than the construction of new plants, supported by the easing of operating restrictions in several Northeast Asian economies.
Japan and South Korea Increase Coal Imports
The trend is already becoming visible across major Asian energy markets.
In Japan, coal-fired electricity generation increased 11% while gas-fired output declined 13%. Coal imports during May were tracking more than 20% above year-earlier levels. South Korea recorded an even sharper rise, with coal imports climbing more than 50% compared with the same period last year.
Elsewhere in Southeast Asia, countries including Vietnam, Thailand and the Philippines are increasing coal plant utilisation to compensate for tighter natural gas supplies. Vietnam’s coal sector has also attracted fresh foreign investment as demand for thermal generation remains strong.
China remains relatively insulated from the LNG crunch due to its lower dependence on gas-fired power generation. Combined with healthy coal inventories and growing renewable energy output in China, India and other major markets, the region has avoided the severe supply pressures experienced during the 2022 energy crisis triggered by the Russia-Ukraine conflict.
Coal Prices Expected to Stay Elevated
Rystad Energy forecasts that Newcastle 6,000 kcal thermal coal, the benchmark for seaborne coal traded across Northeast Asia, will average around $125 per tonne in 2026 before easing to approximately $115 per tonne in 2027.
The anticipated decline reflects expectations of improving LNG supply conditions and the gradual restart of nuclear power capacity in parts of Northeast Asia, both of which could reduce pressure on coal demand.
Current coal prices are being supported by cautious buying activity, stockpiling efforts and heightened geopolitical risk premiums rather than any fundamental structural shift in energy markets.
Escalation Could Push Demand Even Higher
Should hostilities intensify, the impact on coal markets could become significantly larger. Rystad Energy estimates that coal demand could rise by around 90 Mt in 2026 alone, lifting cumulative additional demand to nearly 190 Mt over the coming years.
Despite the near-term resurgence, analysts maintain that the longer-term outlook for coal remains constrained as renewable energy continues to expand its share of the global power mix. Coal is increasingly viewed as a backup fuel, providing energy security during periods of supply disruption until storage technologies, grid flexibility and low-carbon generation capacity are sufficiently developed to meet peak demand.
