K-Points

War on Iran Pushes Coal Demand to Record 8.94 Billion Tons;
War Disrupts Hormuz and Bab Al-Mandeb Traffic, Sending Oil Prices Soaring


War on Iran Pushes Coal Demand to Record 8.94 Billion Tons


A sharp increase in natural gas prices, triggered by the conflict in the Middle East and the effective blockade of the Strait of Hormuz by Iran, is prompting countries to turn increasingly to coal for electricity generation, according to the International Energy Agency’s latest assessment of the global coal market.

The IEA had previously expected global demand for coal—the world’s most widely used combustible solid fuel—to decline slightly from the previous year. However, the disruption to energy supplies has reversed that outlook. Global coal consumption is now projected to grow by 1.2% in 2026, reaching a record 8.94 billion metric tons.

The increase reflects a broader shift in energy markets. As natural gas prices rise and LNG deliveries become less reliable, utilities and industrial consumers are seeking cheaper and more readily available alternatives. Coal-fired power plants, despite continuing pressure from climate policies and emissions-reduction targets, can often be brought back into service or operated more intensively when gas supplies are constrained.

The outlook for 2027 remains uncertain and will depend largely on developments in the Strait of Hormuz. The strategically important waterway handles a substantial share of global energy shipments, including approximately 25% of the world’s oil trade and about 20% of LNG shipments. Any prolonged interruption could place further upward pressure on gas prices and encourage additional coal consumption. If LNG traffic does not return to normal, global demand for coal could exceed current forecasts.

Conversely, a sustained reopening of the strait and the restoration of regular LNG shipments could ease pressure on gas markets and reduce the need for coal. A decline in geopolitical tensions would also help stabilize energy prices and restore greater predictability to global fuel supplies.

The energy crisis intensified after the United States and Israel launched military operations against Iran on February 28. In June, Washington and Tehran signed a memorandum of understanding calling for an immediate cessation of hostilities on all fronts, including in Lebanon. The agreement, however, was short-lived. On the night of July 8, the United States resumed large-scale strikes against Iran, in violation of the terms of the accord.

The administration in Washington later appeared to signal a move away from sustained large-scale military operations against Iran. Instead, it shifted toward economic pressure, including sanctions and a retaliatory, tit-for-tat strategy. Nevertheless, the continuing uncertainty has kept energy markets on edge, with traders closely monitoring shipping activity, LNG availability and the risk of further disruptions across the region.



War Disrupts Hormuz and Bab Al-Mandeb Traffic, Sending Oil Prices Soaring


Brent crude prices jumped by nearly 6% after shipping traffic through the Bab Al Mandeb Strait collapsed following the Houthi seizure of Mokha, a strategically important port city on Yemen’s western coast. Concerns were further compounded by continued disruptions in the Strait of Hormuz, where vessel traffic also remained unusually low after a renewed series of attacks.

Only six vessels had crossed the Bab Al Mandeb on Thursday   according to preliminary data from Kpler. That was a sharp decline from 30 vessels on Wednesday, 26 on Tuesday and 29 on Monday. Five of Thursday’s vessels were leaving the Red Sea, carrying commodities including grain, crude oil, coal and fertiliser, while only one vessel entered the waterway.

The decline followed the expansion of Houthi's control over parts of Yemen’s western coastline and the Bab Al Mandeb shipping corridor. The group captured Mokha after several days of fighting with forces aligned with Saudi-backed government of Yemen. The port’s location gives the Houthis greater influence over one of the world’s most important maritime routes.

The Houthis had previously announced what they described as a “maritime embargo” targeting Saudi Arabia and have attacked vessels linked to members of the Organisation of the Petroleum Exporting Countries. The Bab Al Mandeb is particularly important for Saudi Arabia because it provides a direct maritime route for crude exports heading toward Asian markets. Following repeated attacks, Saudi shipping operators have increasingly rerouted tankers through the Mediterranean, adding distance, cost and time to journeys.

Shipping activity was also subdued in the Strait of Hormuz. Kpler data showed that only two ships transited the strait on Thursday. Traffic had already fallen to its lowest level of the month on Wednesday as the United States and Iran exchanged attacks involving commercial and maritime targets.

Across the wider waterway, just nine commodity vessels passed through the Strait of Hormuz, compared with 12 on Tuesday and 20 on Monday, according to preliminary Kpler figures. Six vessels exited the Gulf, while three entered from the opposite direction. The actual number of vessels in the area may be higher, however, as many ships switched off their automatic identification system transponders to avoid detection.

The simultaneous reduction in traffic through the Bab Al Mandeb and Strait of Hormuz has heightened fears of a wider disruption to global oil supplies. Although the immediate effect on physical crude availability remains uncertain, traders are pricing in a greater risk of delays, rerouting, higher insurance premiums and potential supply interruptions. Further attacks or the closure of either passage could place additional upward pressure on oil prices and cause more damage to the world economy.