Asia’s Energy Reckoning: Coal Revival Meets Nuclear Revival as Hormuz War Shocks the Grid

The Strait of Hormuz has been effectively closed for five weeks due to the Iran war, cutting off roughly 20% of global oil and liquefied natural gas supplies. For Asia—which depends on the narrow waterway for over 80% of its crude and LNG imports—the consequences have been immediate and severe: fuel shortages, export bans, and government budgets pushed to the brink.

The crisis is forcing Asia to embrace contradictory energy strategies simultaneously. In the short term, governments are returning to coal—the dirtiest fossil fuel—to maintain electricity supplies. In the long term, the supply shock may accelerate nuclear restarts and electric vehicle adoption faster than decades of climate policy ever achieved.

South Korea has urged households to take shorter showers, charge devices during off-peak hours, and shift high-energy appliance use to weekends. Samsung has barred employees from driving to work if their license plate’s last digit matches the current date. Southeast Asian governments are implementing similar restrictions: Thailand introduced a four-day workweek for civil servants and mandated higher office air-conditioning temperatures. Vietnam has suspended some domestic airline routes as jet fuel supplies dwindle.

The Philippines faces the most critical situation, with President Ferdinand Marcos Jr. declaring a national energy emergency on March 24, citing an “imminent danger” to fuel supplies. Transit workers went on strike to protest rising fuel prices.

Government finances are buckling under the strain. Malaysia’s monthly fuel-subsidy bill has surged from 700 million ringgit ($174 million) to over 3.2 billion ringgit ($797 million), with projections reaching 24 billion ringgit ($6 billion) if oil remains above $110 per barrel. Kuala Lumpur cut subsidized fuel quotas by one-third before the weekend to reduce costs.

Thailand is restarting two coal plants decommissioned last year. South Korea removed its 80% operating cap on coal-fired generation. Japan lifted restrictions on coal power generation on March 27, allowing older, less-efficient plants to operate at full capacity for up to one year starting April.

Traditional coal exporters may keep supplies domestic rather than export them. “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 coal plants return online, sunk costs and political economy make shutdowns difficult. “There’s a danger of long-term carbon lock-in once countries 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.

The Iran war is also accelerating nuclear energy plans across Asia. Southeast Asia lacks any operational nuclear power plants, and nuclear energy was politically toxic after the 2011 Fukushima disaster. However, Vietnam finalized a deal with Russia on March 23 to build the Ninh Thuan 1 plant using two Russian-designed reactors. Malaysia is considering nuclear energy to power its growing data center industry.

China has dozens of nuclear reactors under construction and hundreds more in planning stages, according to David Fishman of the China-based Lantau Group. “It’s the most ambitious build plan in the world by far,” he notes.

Taiwan’s President Lai Ching-te announced plans to restart two shuttered reactors, reversing the ruling party’s “nuclear-free homeland” platform. The Philippines has laid out a pathway to nuclear power by 2032 and is seeking South Korean expertise.

Still, permanent shifts remain uncertain. “In every oil crisis, the knee-jerk reaction from net importers is, ‘We must switch to non-fossil fuel sources,'” says Li-Chen Sim of the Middle East Institute. “But this is quickly forgotten once the crisis is over.”

Fossil fuels serve purposes beyond power generation. “No Southeast Asian country is about to permanently shift away from fossil fuels,” Sim adds, noting the region’s semiconductor, plastics, and textile industries depend heavily on petrochemical inputs.

The crisis may trigger “demand destruction”—permanent shifts in consumer behavior due to high prices. EV dealerships across Southeast Asia reported increased customer interest and orders in March. Indonesia’s President Prabowo Subianto pledged that all vehicles in Indonesia would eventually be electric.

“Chinese EVs have been gaining strong traction in markets like Australia recently, and electric two-wheelers in Southeast Asia were already expanding rapidly even before the current crisis,” says Hao Tan, professor of management at the University of Nottingham Ningbo China. “Higher oil prices are most likely to accelerate this trend, and Chinese firms hold the strongest competitive advantage.”

China has been insulated from the energy shock due to its diversified energy mix of coal, nuclear, and renewables, plus strategic reserves estimated at 120 days of oil imports. However, China’s decision to suspend refined fuel exports has rippled across the region.

China supplies 40% of Australia’s jet fuel; Vietnam, the Philippines, and Bangladesh also rely on Chinese fuel. Thailand and South Korea have imposed limits on refined-fuel exports. Australian mines warn of suspensions due to dwindling diesel supplies. Airlines across the region are adding fuel surcharges, and Vietnam and the Philippines are considering grounding planes.

“China may take a reputational hit for halting fuel exports, but Beijing may have had little practical choice,” Fishman argues. “Wouldn’t you do the same if you had excess refining capacity and were facing a potential domestic shortfall? It’s horrendous math that you can’t get around—but it’s not wrong.”

This story was originally featured on Fortune.com