Asian countries have been criticized for years for not ditching coal fast enough. They were vindicated this month when the Middle East war cut off 20% of global LNG flows overnight after Qatar, Asia’s key term LNG supplier, shut in production and exports, says Oilprice.com report.
China, India, South Korea, Japan, and the whole of Southeast and South Asia are using the coal buffers they have created in recent years. Their insistence that diversification and energy security are more important than headline emission reductions is paying off as spot LNG prices in Asia surged by 70% to three-year highs that few countries in Asia Pacific can afford.
Coal cannot fully replace the lost gas supply, but it creates a welcome buffer to help Asia go through the biggest supply disruption in energy markets, ever.
In the early days of the war, Qatar announced it is halting LNG production at Ras Laffan, the world’s biggest liquefaction complex, and issued force majeure notices to customers, while the Strait of Hormuz remains inaccessible for tanker traffic.
As traffic via the Strait of Hormuz is effectively closed, the LNG supply shock to Asia is immediate, as it receives a total of 85% of Qatar’s LNG exports.
Asia is attracting most flexible-destination LNG cargoes away from Europe amid renewed competition for supply.
But prices are so high that many countries in the region are buying only if they have to avoid emergency situations.
“South Asia is the most exposed region to any Strait of Hormuz disruption, with Qatar and the UAE supplying around 53% of India’s LNG imports in 2025, 72% of Bangladesh’s, and 99% of Pakistan’s,” Kpler LNG & natural gas insight manager Laura Page wrote last week.
“If disruption persists, the adjustment is likely to come through demand destruction rather than replacement buying, as Pakistan and Bangladesh are unlikely to purchase spot LNG at current prices while India becomes increasingly price sensitive.”
Reduced gas consumption and fuel switching are part of the solution for Asia—to fall back on thermal coal power generation.
Coal prices have also increased since the war in the Middle East began, but by about 14%–a much smaller rise than the 70% jump in spot LNG supply.
Among Asian buyers, China and Japan, although they are the world’s two largest LNG importers, have a relatively limited exposure to Qatar’s LNG, at just 6% and 5% of their gas supply mix, respectively, Ken Lee, an LNG analyst at Vortexa, said last week.
The South Asian economies are most exposed to Qatari LNG, with the emirate accounting for 45-99% of their LNG imports and around 20% of their gas supply. But these are very price sensitive and unless they need very urgently to avert a crisis, they are likely to pull out of the spot market, according to Vortexa.
South Korea, Taiwan, and Singapore are most vulnerable to high spot LNG prices. If Qatar’s supply doesn’t return soon, their exposure to the spot LNG market “is likely to grow substantially because gas accounts for at least a quarter of the power mix in all three countries,” Lee said.
The capability to switch more power generation to coal from gas varies across Asia. China and India, the biggest buyers and users of coal, have “a meaningful substitution buffer that could reduce their exposure to oil and gas price spikes to some extent,” Deepali Bhargava, Regional Head of Research, Asia-Pacific at ING, reckons.
Amid the major LNG supply shock, both Northeast Asia and South Asia face gas demand destruction if flows from Qatar do not return soon, according to Wood Mackenzie.
“Despite efforts to source additional cargoes, alternative supply sources cannot fully replace Qatari volumes. As a result, demand destruction is likely, particularly through higher coal utilisation in power generation and reduced industrial consumption,” WoodMac’s analysts say, noting that Northeast Asia’s LNG demand could fall by 4-5 million tons through the third quarter of 2026 if supply disruptions last for two months.
Wood Mackenzie previously projected 2.2% growth in Northeast Asian LNG demand in 2026, but the supply shock is likely to halt that expansion.
“Higher spot prices will drive greater coal utilisation in the power sector and may hold back industrial gas consumption in some markets,” said Miaoru Huang, research director, Asia Pacific gas and LNG at Wood Mackenzie.
LNG demand in South Asia is expected to be 2–3 million tons lower through Q3 2026, compared to pre-crisis projections, WoodMac has estimated.
India faces curtailments in industrial gas use, Pakistan is deploying a mix of demand curtailment, fuel switching, and renewable generation expansion to rebalance the power system, while Bangladesh is already rationing gas supply as the surge in LNG spot prices is untenable for the country’s energy import bill, the consultancy said.