The Iran War Changes the "Energy Pattern": Major "Oil and Gas" Customers Turn to "Coal and New Energy"

# Persian Gulf Conflict Sparks Second Global Energy Supply Crisis; Narrative of Natural Gas as “Transition Fuel” Rapidly Unravels

By Zhao Ying

Source: Wall Street News

The conflict in the Persian Gulf has triggered a second global energy supply crisis, rapidly dismantling the narrative of natural gas as a “transition fuel.” Major economies in Asia and Europe are turning back to coal one after another. Coal-fired power generation in Europe is expected to surge by 20% this summer, while India, Japan, and Bangladesh are rushing to restart coal-fired units. At the same time, capital markets are betting on new energy, with shares of CATL and BYD surging more than 15%.

The Persian Gulf conflict is reshaping the global energy landscape. As natural gas supplies take a heavy hit, major economies in Asia and Europe are reverting to coal while accelerating the rollout of renewable energy, marking a profound shift in energy strategy quietly underway.

Samantha Dart, Global Co-Head of Commodities Research at Goldman Sachs, warned: “We are now facing a second, massive energy supply shock. If you are in Asia and experience this again, you will likely change your long-term strategy — relying more on coal, for longer, scaling up renewables faster, and becoming less dependent on natural gas.” This assessment is being borne out by market actions one by one.

From Japan’s announcement to expand the use of inefficient coal-fired power, to India ordering coal plants to delay maintenance and run at full capacity, to multiple European countries re-evaluating their coal phase-out timelines, the story of natural gas as a “transition fuel” is unraveling at an accelerated pace. Meanwhile, capital markets have already voted with their feet — shares of leading Chinese battery and new energy companies have sharply outperformed international oil giants.

## Narrative of Natural Gas as “Transition Fuel” Collapses; Coal Demand Makes Strong Comeback

The natural gas supply shock triggered by the Iran war represents the second major energy crisis in less than four years, following the Russia-Ukraine conflict. U.S. and Israeli strikes on Iran, and subsequent retaliatory attacks on Qatar’s Ras Laffan facilities, could cause years of supply disruptions. The European benchmark natural gas price currently stands at around €54 per megawatt-hour, exceeding the €50 threshold analysts view as triggering large-scale coal-for-gas substitution.

According to Bloomberg, power analysts at London Stock Exchange Group estimate that if the European benchmark natural gas price holds at around €50/MWh, coal-fired power generation in Europe could rise by roughly 20% this summer compared with a year earlier. The Netherlands, Poland, and the Czech Republic all face upward pressure on coal use, while Germany is considering restarting mothballed coal plants to lower electricity prices. Data from BloombergNEF show that Europe’s coal-fired power capacity has fallen by 45% since 2015, but remaining stock is still sufficient to act as a buffer during crises.

Tony Knutson, Global Head of Thermal Coal Markets at Wood Mackenzie, said the shock has affected more countries than the Russia-Ukraine war, calling it “a larger disruption.” Countries short on natural gas have no choice but to pull the coal lever. Fatih Birol, Executive Director of the International Energy Agency (IEA), also stated that high energy prices will push governments, industries, and households to seek alternatives, adding that upward pressure on coal use “is hardly surprising.”

## Asia Bears Brunt; India, Japan, Bangladesh Accelerate Shift to Coal

Asia is at the epicenter of this shock. Japan, South Korea, and Taiwan are major global LNG importers with large-scale coal-fired generating units, giving both the ability and incentive to switch quickly. Japan has announced it will allow more coal plants to participate in capacity auctions and expand the use of inefficient coal-fired power; South Korea is also considering relaxing restrictions on high-polluting power. Newcastle coal futures, the Asian thermal coal benchmark, have risen roughly one-third so far this year, hitting their highest level since 2024.

India’s situation is particularly representative. Authorities have ordered coal plants to postpone voluntary maintenance outages and directed Tata Power’s 4-gigawatt plant in Gujarat — idle for months — to operate at full capacity until the monsoon season arrives in June. Shares of Coal India Ltd. rose earlier this month to their highest level since 2024. Anandji Prasad, Technical Director at Western Coalfields, a subsidiary of Coal India, said the crisis “has given coal a new bargaining chip in India” and stressed the urgency of replacing petroleum products and natural gas with coal.

Bangladesh faces an even more severe predicament. According to Bloomberg, the country’s new government has been forced to seek a $2 billion loan to import enough fuel to get through the summer, while planning to run coal plants at maximum capacity in the near term. Shafiqul Alam, Bangladesh Chief Analyst at the Institute for Energy Economics and Financial Analysis, noted that as LNG prices rise and power shortages worsen, coal will carry more baseload supply.

## Capital Markets Bet on Faster Energy Transition; New Energy Stocks Outperform Oil Majors

In tandem with the short-term rebound in coal demand, capital markets are clearly betting on an accelerated long-term energy transition.

Since the outbreak of the Iran war, shares of Chinese battery and electric vehicle leaders CATL and BYD have each risen more than 15%, significantly outperforming ExxonMobil and Chevron. Investors widely believe the shock will accelerate the substitution of fossil fuels with batteries and energy storage systems, driven by both cost and supply security considerations.

In the European market, Chinese auto brands are regaining momentum amid surging oil prices. Sales of brands such as BYD and Leapmotor rebounded in Europe in February, with the Middle East conflict pushing up fuel costs and further enhancing the appeal of electric vehicles.

Goldman Sachs’ assessment aligns with market trends: coal serves as an emergency option in the short term, but the crisis is pushing countries to rethink their energy mix and place renewable energy development on a more urgent agenda.

Doug Arent, Senior Fellow at the World Resources Institute’s Polsky Center for Global Energy Transition, said global coal demand in 2026 “will definitely not decline as projected before the war,” while emphasizing that the immediate priority is “maintaining power supply and production efficiency.” The IEA previously forecast a 1.4% drop in global coal demand by 2027 — a projection now facing severe challenges.

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