Hormuz Crisis to Push Global Coal Demand to Record High

The International Energy Agency warned in its mid-year update that coal consumption is likely to rise as countries respond to constrained oil and gas trade linked to the closure of the Strait of Hormuz. Reduced LNG shipments and higher natural gas prices have forced several large energy consumers to increase coal-fired generation to avoid shortages while renewable capacity continues to expand more slowly.

The IEA projects global coal demand will climb by 1.2% in 2026, bringing consumption to a record 8.94 billion metric tonnes. China and India — the world’s two largest coal users — are each expected to increase use, to about 5.0 billion tonnes and 1.353 billion tonnes respectively. Global coal production matched a record in 2025 but is forecast to edge down slightly year on year in 2026, even as demand rises.

Countries across Asia and parts of Europe have already switched back to coal amid tighter gas markets. The report cites Japan, India, Bangladesh, the Philippines, South Korea, Thailand, Taiwan, China and some European nations as increasing coal-fired generation. In China, higher oil prices have also boosted coal consumption for chemical feedstocks. The IEA noted that while coal shipments do not usually transit the Strait of Hormuz, the squeeze on gas supplies has pushed systems to substitute coal for gas in power generation.

Weather risks could amplify the trend: a strong El Niño would likely raise temperatures and reduce hydropower output in key Asian markets such as India and Vietnam, lifting electricity demand and potentially further increasing coal use. The 2027 outlook remains uncertain and depends on whether LNG flows and gas prices recover — if natural gas availability improves, some systems could switch back from coal to gas.

Rising coal consumption has climate implications. The UN has for the first time acknowledged the world is on track to overshoot the 1.5°C target, and coal-related emissions are expected to climb alongside higher usage. In 2025 global energy-related CO2 emissions rose by 1.1% to 35.806 billion tonnes; the United States accounted for roughly 13.3% of the increase in direct energy CO2 emissions and about a third of the increase when broader measures including methane and flaring are included. Several European countries have considered postponing or restarting coal plants to ensure supply, while the United States — cushioned by cheap domestic gas and growth in wind and solar — is forecast to see coal use decline this year.