War in the Middle East is forcing Asia to turn to coal to plug the gaping hole emerging in its supply of liquefied natural gas.
Nations from South Korea to Indonesia and Bangladesh are prioritizing coal as a power source, as the intensifying conflict upends gas supplies from a key exporting region. Among the worst hit countries is Qatar, home to the world's biggest LNG export facility that Asian customers rely on.
Its Ras Laffan plant has suffered extensive damage after a sharp escalation of attacks on energy infrastructure across the Persian Gulf. As the global gas market buckles under pressure from surging prices, Asian nations are seek alternatives. That means doubling down on their mainstay fuel -- coal.
"Coal is already the dominant fuel in Asia's power mix, making up well over 40%-50% across the region, and it has long been more cost-competitive than gas," said Sam Chua, analyst at Rystad Energy AS. "But what is accelerating now is gas demand destruction," he said. "LNG is simply unaffordable for price-sensitive buyers."
The clearest example is Bangladesh, which has curtailed gas to power plants and fertilizer producers, and is using coal-fired capacity as a replacement, said Chua. He expects a similar dynamic to play out elsewhere in South and Southeast Asia, where governments won't want to incur the political costs of blackouts.
Most Qatari LNG ends up in Asia, and the latest strikes have damaged about 17% of the country's production capacity. The virtual closure of the Strait of Hormuz means that shipping gas is in any case nearly impossible.
Soaring gas prices have coursed through into the coal market. Newcastle futures, the Asia-Pacific benchmark, are at their highest since the end of 2024.
That's put pressure on regional coal producers to export more. Indonesia, the world's top supplier, has allowed miners to boost output, reversing its earlier policy of capping production to support prices.
Other measures include South Korea lifting its capacity cap on coal-fired power, while Japan's biggest electricity generator has floated the possibility of switching to coal if Middle Eastern disruptions persist. The Philippines, meanwhile, is in talks with Indonesia to secure more coal to ensure stable power supplies.
The willingness to shift back to the dirtiest fossil fuel is a clear example of economic necessity trumping environmental goals. The disruptions in the Middle East also raise questions over whether cleaner-burning gas can live up to its billing as a bridge to renewable energy.
In the meantime, governments are on the clock as the summer approaches, when baking heat in much of the region forces people to crank up the air conditioning and electricity demand typically peaks.