Asia Turns to Coal as Middle East Conflict Chokes LNG Supply
The ongoing conflict between the US and Israel has led to a significant disruption in liquefied natural gas (LNG) shipments, causing Asian utilities to pivot towards coal-fired power generation to cut costs and ensure energy supply.
According to industry officials, Asia spot LNG prices have doubled to three-year highs, following the halt of shipments from Qatar, the second-largest global exporter. The conflict has also resulted in a near-total shutdown of shipping through the Strait of Hormuz.
In South Asia, Bangladesh is increasing coal power generation and coal-fired imports, while Pakistan aims to boost domestic power sources after solar additions helped avoid LNG supply volatility following the 2022 Ukraine invasion. In Southeast Asia, the Philippines is ramping up coal-fired power and slashing LNG-fired output, with Vietnam's EVN negotiating coal supplies.
Natural gas has accounted for a declining share of Asia's power generation due to surging renewables usage, despite global energy majors betting billions on regional LNG demand growth. Analysts predict that war-driven supply disruptions will trigger LNG demand destruction across Asia, with prices likely to remain elevated and volatile even after the crisis.
Aziz Khan, chairman of Bangladesh's Summit Group, warned that passing along higher power costs would 'break the backbone' of poorer countries' economies. Wood Mackenzie analyst Lucas Schmitt expects Asian LNG demand growth to decline significantly in 2026 due to the conflict.