IEA Reverses Coal Outlook as Iran War Pushes Asian Demand to Record
Asian spot LNG up 62% since the Iran war is pushing the region back to coal, forcing the IEA to project record global demand this year.
The International Energy Agency reversed its coal demand forecast in a report published September 10 (2026-09-10), projecting global coal consumption will hit a fresh record this year, a conclusion that Canary Media reported September 18 (2026-09-18) reflects the durably disruptive effect of the Iran war on global energy markets.7,8
The Strait of Hormuz, through which roughly a fifth of global oil and gas shipments transit, has been the pressure point. Asian spot LNG prices have climbed 62% since the war began, Reuters reported, while the Newcastle physical coal benchmark rose 13% over the same span. That gap has made fuel switching economically unavoidable for utilities holding both coal and gas capacity.3,2
Japan and South Korea moved earliest. Japanese coal-fired power supply rose 11.1% in April (2026-04), the fastest pace in at least a year, while gas-fired output dropped 12.9% to 16,447 gigawatt-hours, Reuters reported, citing Japanese Electricity Market data. In South Korea, coal-fired generation jumped 39.7% year over year in April to 10,733 gigawatt-hours, the biggest increase since August 2019, while gas output fell 6.4%, according to Korea Power Exchange data cited by Reuters.3
The trend held into May (2026-05). Reuters data showed coal supply running 18.3% above year-earlier levels in Japan and 14.7% higher in South Korea during the first ten days of that month, with gas-fired generation falling 23.4% and 12.2% respectively.3
Newcastle physical coal was priced at $137.05 per tonne on September 20 (2026-09-20). JKM Asian LNG stood at $27.51 per MMBtu. The spread remains wide enough to sustain the fuel switch across most Northeast Asian generating fleets. Analysts noted prices remain below the records set after Russia's 2022 invasion of Ukraine, though continued LNG supply pressure could push both benchmarks higher before winter.4
The IEA's September 10 (2026-09-10) projections put scale to the regional data. Chinese coal consumption is set to rise 1% to 5 billion tons this year; India's demand is forecast 4.2% higher at 1.353 billion tons, reversing a temporary drop in 2025, the IEA said. Global coal investment is expected to reach $180 billion in 2026, the highest since 2012, per IEA data.7,6
Those investment projections sit alongside an awkward prior trend. Global coal-fired power generation declined 0.6% in 2025, the Global Energy Monitor reported, but new coal capacity increased 3.5% that same year, meaning capital was already flowing into new coal plant before Hormuz disruption widened the economics.6
The clean energy case has not been abandoned. Vietnam, which increased coal burn sharply after the war began, has also committed to rooftop solar on 10% of public offices and homes by 2030. Analysts said the crisis is likely to accelerate investment in domestic renewables across Asia, removing the seaborne supply exposure that Hormuz has made visible. "The ongoing Iran oil and gas crisis highlights the importance of domestic energy," one analyst told Canary Media.1,6
History supports both outcomes running at once. E&E News reported that analysts expect the U.S. and China could emerge from the conflict in stronger positions, with more U.S. oil output and expanded Chinese EV market share. "I don't see this as being a pro-transition or anti-transition story," one analyst told the outlet. Dinita Setyawati, senior energy analyst at Ember, offered a harder near-term view: "The shift will impose substantial environmental and public health costs," she said.5,1
Two Indian LPG shipments totaling over 92,700 tons recently cleared the Strait of Hormuz, AP reported, suggesting the passage has not been fully blocked. But LNG flows remain suppressed at prices that shut gas-fired generation across most of Northeast Asia. Negotiations on ending the Iran conflict were still under way as of late June (2026-06-29), Bangkok-based reporting noted, with no clear timeline to resolution. Any credible move toward de-escalation would compress the JKM-Newcastle spread sharply, testing whether Asian utilities that rebuilt coal positions through April and May (2026-04 to 2026-05) can unwind them before winter demand peaks.2,6