Asia Shifts Back to Coal as Iran Conflict Disrupts Oil and Gas Supply Chains

Asian countries are increasingly turning to coal power as the ongoing conflict in Iran disrupts critical oil and natural gas shipments across the region. The pivot threatens to worsen air pollution, slow progress on climate goals, and create a dangerous dependency on a fuel source many nations had been working to phase out.

The continent is particularly vulnerable to these disruptions because it relies heavily on imported fuel, much of which passes through the Strait of Hormuz—a strategic chokepoint that handles approximately one-fifth of global oil and natural gas trade.

Liquefied natural gas (LNG), which has been promoted as a cleaner bridge fuel in the transition from coal to renewable energy, is now facing supply constraints. While the United States has been working to expand LNG exports across Asia, the current geopolitical tensions are forcing countries to reconsider their energy mix. Though LNG burns cleaner than coal, it still emits climate change-causing gases, particularly methane.

The war has prompted several Asian nations to implement emergency measures. India is increasing coal consumption to meet rising summer electricity demands, which are expected to peak at 270 gigawatts—nearly twice Spain’s total electricity production capacity. The country has stockpiled enough coal for about three months, with some reserves specifically designated for small businesses.

Similarly, South Korea has lifted restrictions on coal-fired power generation during periods when LNG supplies are constrained, while Indonesia is prioritizing domestic coal use over exports. Thailand, the Philippines, and Vietnam are all boosting electricity generation from coal-fired plants to ensure energy security.

“This kind of crisis is a real sort of warning,” said Julia Skorupska of the global coalition Powering Past Coal Alliance, noting how the current situation exposes the region’s vulnerability to energy supply shocks.

Coal’s Resurgence in Regional Energy Markets

Coal remains deeply integrated into Asia’s emergency energy planning. Its widespread availability across the region makes it the default backup when renewable energy sources or natural gas fall short, according to Sandeep Pai, an energy expert at Duke University.

China, both the world’s largest coal consumer and producer, has built record coal power generating capacity since 2021 to strengthen its energy security. The country’s national policy continues to support coal use, even as it develops vast clean energy capacity that provides some buffer against supply disruptions.

In India, two liquefied petroleum gas shipments totaling over 92,700 tons recently passed through the Strait of Hormuz successfully. However, energy analyst Pai notes these imports will likely be directed toward industries like fertilizer production rather than power generation, leaving coal as the primary option for electricity needs.

Coal industry representatives like Michelle Manook of FutureCoal argue the situation highlights the importance of energy diversity. “The lesson has to be diversity,” she said, suggesting strategic coal use remains necessary even as countries transition toward cleaner energy sources.

Pauline Heinrichs, a climate and energy researcher at King’s College London, points to China’s increased reliance on coal during hydropower shortages caused by drought as a troubling pattern. “You learn to respond to shocks generated by certain insecurities by reproducing the insecurity,” she explained, noting how these emergency measures often exacerbate the climate change that contributed to the initial energy shortfalls.

Indonesia Prioritizes Domestic Coal Needs

Complicating the situation for import-dependent countries, Indonesia—the world’s largest coal exporter—is now prioritizing domestic use over exports. This shift could further tighten regional supplies and push global prices higher, according to Putra Adhiguna of the Energy Shift Institute.

Coal prices are established globally, leaving importing nations exposed to market volatility and supply disruptions. More coal availability does not guarantee affordable or reliable power, emphasized Russell Marsh of E3G, a climate change think tank.

Vietnam is already experiencing this volatility firsthand. The country increased coal imports after weather-related shortages, but supplies from Indonesia have become uncertain. Consequently, Vietnam is exploring alternative import options from the United States and Laos, according to energy market tracker Argus Media.

Since the Iran conflict began, the Newcastle coal price benchmark—the primary coal price indicator for Asia—has risen by 13 percent. These higher prices particularly impact Southeast Asia, the world’s third-largest coal-consuming region. In response to mounting energy concerns, Philippine President Ferdinand Marcos Jr. recently declared a state of national energy emergency.

Long-Term Risks of Coal Dependence

The current return to coal threatens to undermine long-term efforts to phase out coal-fired power generation across the region.

Indonesia was already struggling to meet its coal plant retirement targets before the Iran conflict, facing financing delays for transition programs. According to the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA), coal power in Indonesia became 48 percent more expensive in 2024 compared to 2020 due to aging infrastructure and rising costs. This led to a 24 percent increase in subsidies to the national utility, reaching $11 billion—approximately 5 percent of the national budget.

Jakarta had been promoting LNG use to facilitate a shift away from coal. However, the renewed reliance on coal “sends a signal” that transitioning to gas “is not as easy as it sounds,” noted Adhiguna.

South Korea had pledged to retire most coal plants by 2040 and halve its emissions by 2035. Yet the country is now permitting greater coal usage when air pollution levels are low and LNG supplies are constrained. In 2023, South Korea needed to add approximately 8 gigawatts of new wind capacity annually to meet its net-zero targets, according to Agora Energiewende. However, growth in renewable energy has been slow, with clean power supplying just 10 percent of electricity in 2024, compared to a global average of 32 percent, IEEFA reports.

Environmental and Health Consequences

Burning more coal risks worsening already dangerous air pollution in major Asian cities. Coal combustion produces fine particulate matter that can lodge deep in the lungs and bloodstream, increasing the risk of heart disease, stroke, lung cancer, and chronic respiratory diseases, according to the World Health Organization.

All of India’s 1.4 billion citizens breathe air with particulate concentrations that WHO considers unsafe, according to a report from the Energy Policy Institute of Chicago. The government has temporarily suspended some air quality regulations, allowing restaurants to burn coal to compensate for gas shortages.

Vietnam faces similarly severe air pollution, with PM2.5 levels far exceeding WHO guidelines. Though the country is promoting electric vehicles and has targets to reduce coal use, immediate energy needs are taking precedence.

Lan Nguyen, a shop owner in Hanoi, expressed her daily worry for her asthmatic son: “I worry for my son’s lungs every day,” she said, acknowledging coal’s current necessity for electricity while fearing its health consequences.

As the region grapples with these immediate energy security challenges, the true long-term solution lies in accelerating renewable energy deployment—a path that would address both energy security and public health concerns while supporting global climate goals.