ENERGY & BUSINESS — The war involving Iran has disrupted global energy markets, creating an unexpected boost for coal producers from South Africa to Australia as countries search for alternatives to disrupted oil and natural gas supplies.
The conflict has affected shipments through the Strait of Hormuz, a crucial route for global energy trade. With gas supplies under pressure and energy prices rising, some electricity producers have turned back toward coal, increasing demand and improving the outlook for mining companies.
South African coal producer Thungela Resources, for example, reported that its first-half profit more than doubled compared with the same period last year. Its Australian operations also recorded a substantial increase in production. 0
Why the Iran War Is Boosting Coal
The connection between the Iran conflict and coal is indirect.
Iran's position around the Strait of Hormuz has disrupted the movement of oil and liquefied natural gas through one of the world's most important energy corridors.
When natural gas becomes more expensive or difficult to obtain, electricity producers have another option: coal.
Coal is generally more carbon-intensive than gas, but it can remain economically attractive when gas prices rise sharply.
The Strait of Hormuz Is Central to the Crisis
The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
During normal conditions, a huge volume of global oil and LNG shipments passes through the waterway.
The conflict has disrupted those flows, putting additional pressure on countries that depend heavily on imported energy.
Asia has been particularly exposed because major economies including China, India, Japan and South Korea receive substantial amounts of energy through the region. 1
Asia Is Turning Back Toward Coal
Several Asian countries have increased or considered increasing coal-fired electricity generation as they deal with energy shortages and higher gas prices.
Japan has relaxed restrictions affecting some older coal plants, while South Korea has delayed the shutdown of some coal facilities.
Bangladesh, Thailand, the Philippines and Vietnam have also increased reliance on coal-fired generation during the energy disruption.
Pakistan has recorded a particularly sharp increase in electricity generated from imported coal. 2
South African Coal Producers Are Benefiting
South Africa has become one of the countries benefiting from the stronger demand for thermal coal.
Coal exports are being supported by higher international prices and demand from countries looking for alternatives to expensive gas.
Thungela Resources reported a major increase in its first-half earnings, helped by stronger production and improved prices at both its South African and Australian operations. 3
The company also expects prices to remain relatively strong as European and Asian markets prepare for winter.
Australia Is Another Major Beneficiary
Australia is one of the world's major coal exporters, making its producers particularly sensitive to changes in international demand.
Thungela's Ensham operation in Queensland increased production significantly during the first half of the year.
The rise demonstrates how quickly geopolitical disruptions can change commodity markets.
When buyers become concerned about gas supplies, producers capable of supplying alternative fuels can suddenly find themselves in a stronger commercial position.
Coal Prices Have Risen
Coal prices have increased in several major markets since the conflict disrupted energy supplies.
South African and Australian producers have benefited from the combination of higher prices and stronger demand.
However, the increase is not comparable with the extraordinary coal price surge that followed Russia's invasion of Ukraine in 2022.
In the current crisis, the main mechanism is fuel switching: expensive or unavailable gas encourages some electricity producers to use coal instead. 4
Indonesia Remains the World's Biggest Coal Exporter
Indonesia remains the world's largest coal exporter, followed by Australia and Russia.
The increase in international demand has encouraged Indonesia to reconsider earlier efforts to reduce coal production.
Higher prices create a strong incentive for major producing countries to keep mines operating and maximise exports.
India and China Remain Critical Markets
China and India are the world's two largest coal consumers and together account for roughly 70 percent of global coal consumption.
Both countries also produce large quantities of coal domestically.
Their enormous electricity markets mean that changes in their energy strategies can have a major impact on global coal demand and prices.
India's growing electricity demand has also encouraged additional investment in domestic coal production. 5
Why Coal Is Still Attractive
Coal remains relatively abundant and can be stored and transported in large quantities.
For countries facing an immediate shortage of natural gas, coal can provide a practical backup for electricity generation.
This is particularly important during an energy crisis, when governments are often more concerned about keeping electricity flowing than meeting long-term climate targets.
The Energy Security Problem
The current situation exposes a fundamental weakness in countries that rely heavily on imported fossil fuels.
A geopolitical crisis thousands of kilometres away can suddenly affect electricity prices, industrial costs and household energy bills.
This is one reason energy security has become increasingly important in government planning.
Countries want energy supplies that are not only affordable but also difficult for foreign conflicts to disrupt.
Does This Mean the World Is Abandoning Clean Energy?
Not necessarily.
The temporary increase in coal demand does not automatically mean the global transition toward renewable energy has ended.
Analysts point out that coal consumption is still facing long-term pressure from expanding solar and wind power, improving battery technology and government climate policies.
Coal also remains more expensive and environmentally damaging than many renewable sources when the full long-term costs are considered. 6
The Crisis Could Actually Strengthen Renewable Energy
There is an important contradiction in the current situation.
The disruption is increasing coal consumption in some markets, but it is also demonstrating the vulnerability of fossil-fuel supply chains.
Countries that depend heavily on imported oil and gas may become more interested in domestic renewable electricity because sunlight and wind cannot be blocked by a foreign military conflict in the same way that fuel shipments can.
This could strengthen the long-term economic case for renewable energy.
Coal's Comeback Has Limits
The current surge in coal demand should not be interpreted as proof that coal has permanently returned to dominance.
Coal consumption is still under pressure in several developed economies.
Europe, in particular, continues to pursue long-term reductions in coal use, even as the energy crisis forces some governments to reconsider the speed of their transition.
The duration of the Iran conflict will therefore be important.
If energy markets stabilise, some of the additional coal demand could disappear.
What This Means for South Africa
For South Africa, stronger coal prices create an opportunity for mining companies and exporters.
Higher export revenues can support businesses, investors and government tax revenues.
But the country faces a difficult policy balance.
South Africa has committed to a just energy transition while remaining heavily dependent on coal for electricity generation and export earnings.
Expanding coal production may provide short-term economic benefits while creating longer-term environmental and climate challenges.
What This Means for Australia
Australia faces a similar contradiction.
The country is one of the world's major exporters of coal and natural gas while also pursuing ambitious emissions-reduction goals.
When international prices rise, mining companies have strong incentives to increase production.
That creates additional revenue but also intensifies the debate over Australia's long-term energy strategy.
The Real Winner May Be Energy Security
The most important lesson from the coal rally may not be about coal itself.
It is about the value of having multiple sources of energy.
A country that depends entirely on one fuel or one international supply route can become vulnerable when geopolitical conditions change.
Diversifying electricity generation through renewables, storage, nuclear power, gas and other technologies can reduce that vulnerability.
Our Perspective
The coal boom created by the Iran war should not be mistaken for a permanent reversal of the energy transition.
It is better understood as a warning about how quickly geopolitical events can disrupt energy markets.
Coal producers are benefiting because they can provide an alternative when gas becomes scarce or expensive.
But the same crisis is also showing governments why relying heavily on imported fossil fuels carries strategic risks.
The short-term winner may be coal, but the long-term lesson is that countries with diverse, affordable and locally controlled energy systems are better protected from geopolitical shocks.
Conclusion
The Iran war has created an unexpected boost for coal producers from South Africa to Australia as disruptions to oil and LNG supplies push some countries toward alternative sources of energy.
Higher demand and stronger prices have already improved the financial performance of some mining companies, including South Africa's Thungela Resources. 7
However, the coal rally has limits. Renewable energy continues to expand, while several countries remain committed to reducing their dependence on coal.
The current surge is therefore less a permanent coal comeback than a demonstration of how geopolitical instability can temporarily reshape the global energy market.
Daily Touch Insights Editorial Team
View Journalist Profile
