Asian Buyers Switch Back to Coal as Iran War Lifts LNG Prices and Power Bills

Asian Buyers Switch Back to Coal as Iran War Lifts LNG Prices and Power Bills Japanese and South Korean utilities burned more coal in April as spot LNG jumped 62% since the conflict began, while US power costs feed a 6% inflation print. Bloomberg Surveillance flagged on Wednesday (2026-06-10) that US electricity prices are rising at about 6% a year, a figure now lodged in the inflation debate.⁷ American power bills are climbing, and households are blaming data-centre demand for artificial intelligence even as the picture is more complicated than that.³ The reason this is worth tracking is that two separate shocks, AI load growth and the US-Iran war, are pushing electricity costs higher on both sides of the Pacific at once. Asian utilities are managing the gas side of that squeeze by reaching for coal.^4,5 In Japan, coal-fired power supply rose 11.1% in April, the fastest pace in at least a year, while gas-fired output dropped 12.9% to 16,447 gigawatt-hours, Reuters reported, citing Japanese grid data.⁵ South Korea saw a sharper move. Coal-fired supply jumped 39.7% year over year to 10,733 gigawatt-hours, the biggest increase since August 2019, while gas-fired output fell 6.4%, according to Korea Power Exchange figures cited by Reuters.⁵ The switch accelerated into May. Reuters said coal-fired supply was up 18.3% in Japan and 14.7% in South Korea during the first 10 days of the month, with gas-fired power down 23.4% and 12.2% respectively.⁵ Price is doing the work. Asian spot LNG has risen 62% since the start of the war, while the Newcastle coal benchmark has climbed 13%, according to Reuters.⁵ JKM was last at $18.91. That gap rewards any utility with coal capacity it can run. The trigger sits in the Gulf: Iranian retaliation to US-Israeli strikes knocked out 17% of Qatar's LNG export capacity, tightening supply from one of the world's largest gas exporters.⁵ The buying is widening beyond the two big importers. Reuters reported, citing London-based DBX Commodities, that May coal imports by Asian buyers outside China and India are set to rise 9.4% year over year to 31 million metric tons.⁵ South Korea's coal imports are on track to climb more than 50% in May, and Japan's by more than 20%.⁵ In South Asia, Bangladesh has increased coal-fired generation and imports of coal-based electricity this month, according to government data.⁴ This is demand destruction in slow motion, not just fuel-switching. Wood Mackenzie's Lucas Schmitt said the conflict will significantly reduce Asian LNG demand growth in 2026, and analysts expect high prices and supply uncertainty to curb regional LNG appetite.⁴ Thailand offers the template: a more than twofold rise in sourcing costs has undercut the economics of its gas-heavy power plans.⁶ Europe is feeling the same pressure through a different channel. The European Commission said on Wednesday (2026-05-20) that its fossil fuel import bill had risen by more than EUR 24bn, and used its AccelerateEU plan to argue that more clean electricity is the way to cut exposure to fossil-fuel price shocks tied to the war.¹ ICE Endex TTF front-month was near EUR 50.80, with German baseload day-ahead at EUR 112.94.¹ The crude leg of the story sets the ceiling. A Bloomberg Intelligence survey found most participants expect ICE Brent to average $81 to $100 a barrel over the next 12 months, with oil increasingly priced to be capped near $100 as demand slows to absorb supply losses.² Brent front-month was last at $95.30.² Most respondents put global supply disruptions at 3 million to 7 million barrels a day, with few expecting outages above 10 million.² There is a longer-running demand story underneath the war premium. Wood Mackenzie estimates that last year demand for distribution transformers outstripped supply by 10%, a bottleneck that pushes power costs up regardless of the conflict.³ Data-centre load is real, but the firm's view is that without it prices might be higher still, because data centres help spread fixed grid costs across more consumption.³ The near-term signal is whether the coal switch holds once Qatari capacity recovers, or whether elevated LNG prices entrench coal in the Asian merit order for the rest of 2026. Watch South Korea and Japan's June import data, the Newcastle-to-JKM spread, and any sign that the EUR 24bn European import bill forces faster policy moves. The selloff in the coal ETF, down 3% on the day, suggests the market is not yet convinced the substitution is permanent.^5,1