The International Energy Agency expects coal demand to increase this year in response to ongoing oil and gas trade constraints stemming from the closure of the Strait of Hormuz. Several countries have been forced to turn back to coal to fill the gap, as oil inventories are depleted and countries gradually expand their renewable energy capacity. In its mid-year update, the IEA predicted that coal use would likely increase in some regions of the world owing to higher natural gas prices in 2026.
The conflict in the Middle East and ongoing restrictions on trade via the Strait of Hormuz maritime trade corridor have driven up prices in recent months. This has led to severe global energy disruptions, pushing oil and gas prices higher. The massive reduction in LNG shipments through the Strait of Hormuz has led some countries to face energy shortages, requiring them to turn to other energy sources.
Japan, India, Bangladesh, the Philippines, South Korea, Thailand, Taiwan, China, and some European countries have been forced to increase their coal use to fill the gap. In addition, some countries are not only turning to coal for power; China's coal consumption for chemical product production has also increased in recent months due to high oil prices. Coal consumption may increase further in some regions of the world in the coming months if a particularly strong El Niño weather pattern occurs, as predicted.
Higher-than-normal temperatures and lower hydropower output could drive up power demand across Asia, in large markets such as India and Vietnam. Global coal production matched a record high in 2025 but is expected to decrease slightly year over year in 2026. Despite that, the IEA expects demand for the energy commodity to rise by 1.2 per cent in 2026, bringing the world's consumption to a record 8.94 billion metric tonnes.
Coal demand by the world's two biggest coal consumers, China and India, is expected to rise by 1 per cent and 4.2 per cent respectively, to 5 billion tonnes and 1.353 billion tonnes. The outlook for 2027 is murkier given the unpredictability of trade in the Strait of Hormuz. If LNG flows recover next year, it could drive natural gas prices down, spurring a shift in gas and coal use.
However, global demand will likely increase if energy trade remains restricted. "Although shipping disruptions in the Strait of Hormuz do not directly affect coal markets" and virtually no coal shipments pass through the Strait of Hormuz, "tighter natural gas supply has pushed up prices, prompting some electricity systems to switch from gas to coal," the IEA stated. News of increased coal use is concerning, given that the United Nations (UN) has, for the first time, acknowledged that the world is set to overshoot its target of limiting global warming to 1.5°C above pre-industrial levels.
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