The blockade of the Strait of Hormuz triggered by conflict in the Middle East is pushing Asia's energy systems into a severe test. With Qatar's LNG production abruptly halted and approximately one-fifth of global liquefied natural gas supply vanishing instantly, nations across Asia—from Japan to Bangladesh—are scrambling to secure spot cargoes and restart coal-fired power plants to address the region-wide energy supply crisis.
As of March 18, reports indicate that military conflict in the Middle East has entered its third week, effectively paralyzing the Strait of Hormuz and bringing Qatar's production to a complete standstill. Asia is the world's largest LNG consumption region, receiving over 80% of Qatar's exports. Economies such as Japan, Singapore, Thailand, Pakistan, and Bangladesh rely on natural gas for one-third or more of their electricity.
The impact of the crisis has swiftly reached policy levels. The Thai government this month ordered coal-fired power plants to operate at full capacity and made large-scale use of the national energy subsidy fund to stabilize prices. Data from Bangladesh's state-owned power transmission company show that since the outbreak of conflict involving Iran, the country's coal-fired power generation has risen significantly. South Korea's industry minister stated last week that the country is preparing to increase nuclear and coal power output to hedge against supply volatility. Analysts warn that the shock's effect on Asia's energy landscape will far outlast the duration of the conflict itself.
Price Competition and Coal's Resurgence The Strait of Hormuz is the most critical choke point for global LNG trade. Qatar is one of the world's largest LNG exporters, with the vast majority of its shipments needing to pass through the strait. The current conflict has led to the strait's effective closure and a halt in Qatar's production, removing about one-fifth of global LNG supply from the market almost instantly.
Asia's geographical particularities make it especially vulnerable. Due to terrain constraints limiting cross-border pipeline construction, Asian countries heavily depend on seaborne LNG, primarily sourced from the world's two largest producers—the United States and Qatar. U.S. supply is distant, while Qatar's is now blocked by conflict.
The supply gap has quickly triggered a scramble for spot cargoes across Asia. According to Henning Gloystein, Managing Director of Energy at Eurasia Group, "Asia is in a full-blown price competition; any country that can switch from gas to coal is doing so."
Thailand is one of the economies most typically impacted in this crisis. Since 2011, the country has aggressively promoted LNG imports, building two major import terminals and raising the share of natural gas in power generation to over 50% by 2022, with LNG contributing nearly a quarter—compared to just 2% in 2011. During the 2022 Russia-Ukraine conflict, wealthy European nations heavily entered the LNG spot market, forcing Thailand to postpone the retirement of the Mae Moh coal plant. Now, a similar scenario is playing out again, with the Thai government once again ordering coal plants to run at full capacity.
The situation in Bangladesh is equally severe. Data from the state-owned power transmission company indicate a significant increase in coal-fired power generation since the outbreak of hostilities involving Iran. South Korea's industry minister also publicly stated last week that the country is preparing to increase nuclear and coal power capacity to cope with oil and gas supply fluctuations.
Most Asian analysts expect that, for the duration of the conflict, countries will continue to temporarily turn to coal. However, after the crisis, energy policy will face deeper choices. Amy Kong, an analyst at research firm Zero Carbon Analytics, pointed to Pakistan as a noteworthy reference:
Impacted by the 2022 Russia-Ukraine conflict, Pakistan expanded its solar capacity approximately threefold between 2021 and 2024. This transition was largely facilitated by the availability of low-cost solar panels, effectively reducing dependence on LNG imports. Although the country still faces energy supply disruptions, the expansion of renewables has shielded it from more severe impacts.
Kong stated that Asia's "immediate response will inevitably rely on existing domestic supplies, especially coal," but looking five years ahead, "there will be more discussion about whether natural gas can truly outperform renewables in terms of economics and supply stability."
Another analyst characterized the current situation as a historical inflection point: "After the 2022 crisis, LNG was marketed as a stable alternative to pipeline gas because it could be shipped anywhere. Now, the LNG supply chain itself is confronting its own bottlenecks."