Coal is back and nuclear is next: The Iran war is rewiring Asia’s energy future

The effective closure from the Iran war of the Strait of Hormuz—the critical chokepoint for roughly 20% of the world’s oil and liquefied natural gas—is in its fifth week with no clear signs of resolving. For Asia, which buys more than 80% of the crude and LNG that flows through the narrow waterway, the consequences have been swift: severe fuel shortages, export bans, and government budgets stretched to the breaking point.

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The crisis is forcing Asia to look both backward and forward simultaneously. In the short term, governments are returning to coal—the dirtiest of fossil fuels—to keep the lights on. In the long term, the supply shock may accelerate nuclear restarts and electric vehicle adoption faster than years of climate policy ever managed.

The fuel crisis has pushed Asian countries to turn to increasingly severe measures to maintain their stockpiles.

South Korea urged households to take shorter showers, charge devices during off-peak hours and shift usage of high-energy appliances like washing machines to weekends. Samsung, meanwhile, barred employees from driving their car to work if the last digit of their license plate matches the last digit of the current date.

Southeast Asian governments are rolling out similar restrictions. Thailand introduced a four-day workweek for civil servants, and ordered higher office air-conditioning temperatures to curb demand. Vietnam’s airlines are suspending some domestic routes as the country braces for jet fuel shortages.

The situation is most critical in the Philippines, where President Ferdinand Marcos Jr. on March 24 declared a national energy emergency, citing an “imminent danger” to the nation’s supplies of fuel. Transit workers went on strike on Friday to protest rising fuel prices.

The crisis also is straining government finances. Malaysia’s monthly fuel-subsidy bill, for example, has surged from 700 million Malaysian ringgit ($174 million) to more than 3.2 billion ringgit ($797 million), and could reach 24 billion ringgit ($6 billion) if oil remains above $110 per barrel. Kuala Lumpur cut the quota of subsidized fuel by a third before the weekend in a bid to slice costs.

Back to coal

Asian governments are temporarily pivoting to coal as the Iran war chokes off natural gas supplies, undermining years of effort to curb the continent’s dependence on the dirtiest major fuel.

Across the region, governments have gradually curtailed coal while promoting LNG as a relatively cleaner, more flexible transition fuel.

The Hormuz crisis is reversing that progress. Thailand’s government is restarting two coal plants that it decommissioned last year. South Korea removed its 80% operating cap on coal-fired generation. Japan confirmed on March 27 that it too is lifting caps on coal power generation, allowing older and less-efficient plants to operate at full capacity for up to a year from April.

Japan’s government plans to temporarily lift restrictions on coal-fired power plants as it seeks to ease an energy crunch caused by the Middle East war, an official said on March 27, 2026.Kazuhiro Nogi—AFP via Getty Images

Traditional coal exporters, such as Australia and Indonesia, also may keep coal for themselves rather than share it with their neighbors.

“Indonesia is prioritizing domestic coal consumption over exports, which tightens supply for Asian imports,” says Vicky Janita, an analyst at Rystad Energy. “The rest of the region doesn’t necessarily benefit from Indonesia’s coal abundance if it cannot export.”

The risk is that once a coal plant is brought back online, the sunk costs and political economy of energy pricing make it difficult to shut down again. “There’s a danger of a long-term carbon lock-in once countries decide to reverse plans to retire aging coal-fired fleets,” warns Sharon Seah, coordinator of the Climate Change in Southeast Asia program at ISEAS–Yusof Ishak Institute.

Forward to nuclear

The ongoing war in Iran and Lebanon also is likely to accelerate nuclear plans across Asia.

Southeast Asia, despite years of debate, does not have a single operational nuclear power plant. Nuclear was expensive and politically toxic after the Fukushima nuclear accident in 2011, and cheap natural gas ended up a more attractive option. Other parts of Asia have also been wary of nuclear: Taiwan decommissioned its last nuclear plant last year.

Parts of Asia were making cautious steps toward nuclear energy before the Iran crisis. Vietnam had been in negotiations with Russia to build its first nuclear power plant; that deal was finalized on March 23, when Moscow agreed to help construct the Ninh Thuan 1 plant using two Russian-designed reactors.

Malaysia is also considering nuclear energy to power its growing data center industry without abandoning its net-zero commitments.

Russian President Vladimir Putin welcomes Vietnamese Prime Minister Pham Minh Chinh during their meeting at the Kremlin in Moscow on March 25, 2026. Maxim Shipenkov—Pool/AF