Middle East Conflict Fuels Global Coal Demand Surge

Global coal demand is set to increase this year due to the ongoing conflict in the Middle East, according to the International Energy Agency's (IEA) Mid-Year Update. The report states that energy market disruptions caused by the war have driven up natural gas prices, prompting countries to turn to alternative sources like coal.

The IEA notes that although virtually no coal shipments pass through the Strait of Hormuz, the conflict has affected coal markets indirectly by driving up natural gas prices due to a drop in liquefied natural gas (LNG) shipments. This has led to higher electricity generation from coal in countries with spare capacity.

China is also increasing its consumption of coal for producing chemical products due to high oil prices, while expectations for a strong El Niño weather pattern this year are supporting coal demand in Asia, particularly in India and Vietnam. As a result, global coal demand is forecast to rise by 1.2% in 2026, reaching a record 8.94 billion tonnes.

However, the outlook for 2027 remains uncertain, depending on whether shipping traffic through the Strait of Hormuz recovers and natural gas prices decline back towards pre-war levels. If LNG flows rebound, global coal demand could decrease in 2027, but if the Strait remains closed to LNG shipments, coal demand could increase further.