Asia Burns More Coal as the Iran War Chokes LNG Supply

Asia Burns More Coal as the Iran War Chokes LNG Supply Spot LNG prices have roughly doubled and Asian imports have slumped, pushing the region's biggest gas buyers back to coal for baseload power. Asia's largest LNG importers are turning back to coal as the U.S.-Israeli conflict with Iran disrupts Middle East energy routes and squeezes liquefied natural gas supply. Spot LNG prices have roughly doubled, while Asian LNG imports have fallen sharply in what one report described as the biggest drop the region has seen, according to Energy News Beat and AP News reporting from 2026-05-19.^6,7 That matters because Asia imports much of its fuel, and a large share of it moves through the Strait of Hormuz, a chokepoint for about a fifth of global oil. When that route is threatened, importers cannot simply wait out high prices. They switch to the fuel they can secure and burn domestically, and for most of the region that fuel is coal.⁷ Japan has already moved. In late March 2026 (2026-03), the Ministry of Economy, Trade and Industry suspended for one year, from April 2026 to March 2027, the 50 percent capacity-factor cap on inefficient coal plants running below 42 percent design efficiency, according to Energy News Beat. Coal already supplies about 29 percent of Japan's power mix, and utilities are now free to run older units harder.⁶ The expected payoff is concrete. METI estimates the policy will save around 0.7 billion cubic metres of LNG while providing reliable baseload power, the same report said. For a market where every spare cargo is being bid up, freeing even modest volumes of demand matters at the margin.⁶ This is the backdrop to a longer-running shift in investment. Global coal spending has reached its highest level in 14 years, with energy security rather than economics driving the decisions. The pull is concentrated in Asia, where developed economies in the United States and Europe are still retiring coal at record rates while China and India keep building.⁴ Coal remains the single largest source of electricity worldwide, accounting for roughly 35 percent of global supply, according to Global Electricity. More than 2,000 GW of coal capacity is still operational, with global capacity at about 2,100 GW as of 2024 (2024), down only slightly from its peak as retirements in wealthy nations partially offset new construction in developing ones.⁴ The economics point the other way. Renewables are now cheaper than coal in most markets, the same source noted, which is why retirement timelines, not build costs, have become the binding constraint on emissions. Security fears, for now, are overriding that price signal.⁴ The demand side gives the trend room to run. Power demand from data centres, EVs and green industrial parks in Southeast Asia is forecast to grow by more than 100 TWh over the next three to four years, requiring more than $200 billion in investment, according to an ESG News report citing 2026-05-20 figures. That raises a hard question about whether power systems can expand fast enough to support industrial growth without locking in higher emissions.³ The gas crunch may not be a one-winter problem. Wood Mackenzie said in analysis that local gas production across Asia is falling, with the near-term exception of China, leaving the region structurally short. Without incentives and investment in domestic supply, WoodMac argued, Asia risks repeating the crisis it is now living through.⁵ Not everyone reads the coal pivot as durable. Analysts told regional outlets that while the switch will lift greenhouse gas emissions in the short term, the crisis could ultimately speed the region's shift toward renewables by exposing the cost of import dependence. "The shift will impose substantial environmental and public health costs," said Dinita Setyawati, senior energy analyst at Ember.² The longer-horizon official view leans the same way. The IEA, in its Electricity 2026 report, expects coal's share of the generation mix to be eroded by gains in nuclear, renewables and gas, with renewables and nuclear together rising to about 50 percent of the power mix by the end of the decade. Renewable output is forecast to grow by roughly 1,000 TWh a year through 2030, with solar PV alone adding over 600 TWh annually.¹ So the market holds two stories at once. Coal investment at a 14-year high and Japanese plants running flat out describe the present. IEA forecasts of a shrinking coal share describe the plan. Which one wins depends on how long the Iran disruption keeps LNG scarce and Asian buyers nervous. Watch whether spot LNG prices ease, whether Japan lets the capacity-factor suspension expire on schedule in March 2027 (2027-03), and whether the promised data-centre and industrial demand starts arriving before new domestic gas supply does.^6,5¹