Global Coal Demand Set to Hit Record as Middle East Conflict Disrupts Energy Supplies

BY COMFORT OGBONNA

Global coal demand is expected to rise 1.2% in 2026 to a record 8.94 billion metric tons as disruptions to oil and liquefied natural gas shipments through the Strait of Hormuz push up energy prices and encourage greater use of coal for electricity generation, the International Energy Agency said Thursday.

The increase represents a shift from earlier expectations that global coal consumption would decline slightly this year. The change has been driven largely by the effects of the conflict in the Middle East, which has disrupted energy flows through one of the world’s most important shipping routes.

The Strait of Hormuz is a critical transit point for global energy supplies, particularly oil and LNG. Since the start of the U.S.-Iran war, disruptions to shipping through the waterway have contributed to higher energy prices and raised concerns about the availability of natural gas in markets that depend heavily on imports.

The resulting pressure on gas supplies has encouraged some countries to turn to coal-fired power plants where capacity is available. Countries with gas-fired electricity fleets and spare coal-generation capacity have been able to increase coal use to compensate for higher gas prices or reduced availability.

Coal consumption has been stronger than previously anticipated across several major markets, including Europe, Japan, South Korea and China, as well as other economies affected by the disruption in energy markets.

The latest forecast marks a significant change from the agency’s earlier outlook for 2026. Rather than falling modestly, global coal demand is now expected to reach its highest level on record.

The outlook for 2027 remains uncertain and will depend heavily on developments surrounding the Strait of Hormuz and the recovery of international shipping through the waterway.

If shipping traffic and LNG deliveries through the strait return to more normal levels, coal demand could decline next year as power producers shift back toward natural gas and other energy sources. However, if the waterway remains largely closed to LNG shipments, coal consumption could rise further as countries seek alternatives to meet electricity demand.

The uncertainty illustrates the continued sensitivity of global coal markets to disruptions in other parts of the energy system. Although many countries are pursuing policies aimed at reducing coal consumption and transitioning toward cleaner energy sources, shortages or sharp increases in the cost of alternative fuels can lead utilities to rely more heavily on coal in the short term.

Global coal production, meanwhile, is expected to decline in 2026, although output is projected to remain above 9 billion metric tons for the third consecutive year.

China, the world’s largest coal producer and consumer, has experienced a decline in production following safety inspections launched after a major mine accident in May. The inspections have contributed to a significant reduction in Chinese coal output.

The production decline comes as China continues to play a central role in global coal markets. Changes in Chinese production and consumption can have a substantial effect on international energy prices and the overall balance between coal supply and demand.

The combination of lower production and stronger consumption could place additional pressure on coal markets if energy disruptions continue. At the same time, the longer-term outlook remains shaped by efforts to expand renewable energy, improve energy efficiency and reduce dependence on fossil fuels.

The latest forecast highlights the difficulty of predicting the pace of the global energy transition during periods of geopolitical instability. While governments and companies continue to invest in cleaner sources of energy, disruptions to oil and gas supplies can quickly increase demand for coal when alternative generation capacity is available.

For 2026, however, the immediate effect is clear: global coal consumption is now expected to reach a record level, reversing the decline that had previously been anticipated.