April 16, 2026 - The combination of U.S. policy support and the Iran war has handed coal an unlikely reprieve. But don't call it a comeback.

Iran’s closure of the Strait of Hormuz - the world’s critical energy artery - drove global seaborne thermal coal prices up over 25% in the first few weeks of Tehran’s war with the U.S. and Israel. Prices rose to their highest level since late 2024, adding fresh momentum to an already unexpected ‌rebound.

However, this price increase reflected short-term market conditions rather than a structural recovery in coal economics, which has become apparent as prices have already slipped to just 15% above pre-war levels.

These recent moves come after coal recorded several positive milestones over the past year. U.S. consumption rose 10% in 2025, snapping a 15-year decline, driven by an increase in natural gas prices, U.S. President Donald Trump's policy support, and record electricity demand from data centers and other artificial intelligence infrastructure. Global coal production and consumption also marginally increased last year, mainly on the back of growing energy demand in emerging economies.

Nevertheless, thermal coal prices in the first half of 2025 still hit a four-year low after demand failed to keep pace with the production surge that followed Russia's invasion of Ukraine. China, which accounts for about 56% of global coal demand and is the world’s largest coal consumer, fueled much of the extra consumption with domestic output, which left the seaborne market oversupplied.

Looking past recent years, the U.S. coal industry has had a brutal few decades punctuated by bankruptcies, restructurings, and consolidations. From 2012 to 2022, more than 60 U.S. coal companies filed for bankruptcy, including some of the largest in the industry, with at least eight more since then.

The future does not look much rosier. In December, the International Energy Agency projected that global coal demand would likely plateau and drop slightly by 2030, due to slowing demand from China, as renewables, nuclear power and abundant gas erode its dominance in power generation. While that was before the Iran energy shock, there is no indication that this projection has changed significantly.

Therefore, despite “black gold’s” short-term gains last month, the long-term trajectory is clear: coal, the single largest source of global carbon emissions, is in structural decline in the U.S. and likely to stagnate globally.

Bad Economics

Coal was once the primary source of U.S. electricity, but its diminished importance has long been visible in the world’s largest economy.

There has been little meaningful new investment over the past decade. While there is currently one new coal plant under construction in Alaska, it’s the country’s first since 2013.

Most U.S. operators are instead retiring coal-fired plants because the facilities, many of which are over 50 years old, are increasingly uneconomic to maintain and operate.

The Trump administration is seeking to counter this. It has made expanding energy production a top priority to help deliver the vast amount of electricity needed to fuel the AI revolution.

But even though Energy Secretary Chris Wright said in September that Washington had been in talks with U.S. utilities and expected the majority of the several dozen U.S. ‌coal plants nearing retirement to delay closure, this may just be postponing the inevitable.

That’s because keeping aging plants online can impose real costs on ratepayers.

A case study of a Michigan coal plant illustrates the risk. The Environmental Defense Fund found that forcing the uneconomic facility to remain available shifted costs onto customers and crowded out investment in cheaper energy sources.

Government funding to prop up the industry may make the problem worse for consumers, as federal mandates to extend coal plant operations could cost ratepayers as much as $6 billion per year, according to Grid Strategies.

Moreover, extending coal plant operations requires continued policy intervention, cost recovery measures, and potentially emergency orders. Such support is unlikely to continue if the White House switches parties following the next election in 2028 - and that outlook is too uncertain to anchor long-term investment.

Even if U.S. federal policy does boost coal supply in the coming years, it cannot guarantee that demand follows suit – especially given stiff competition from natural gas and renewables. If a supply-demand mismatch materializes, the result will be a glut and, consequently, lower prices. That’s exactly what happened after the post-Ukraine-invasion supply surge.

Clear-Eyed Capital

It’s true that institutional capital has recently been returning to coal, after shunning it for more than a decade. That’s largely because coal companies have consolidated, cut costs, and returned cash to shareholders in recent years. Consequently, their share prices have recovered from depressed levels to outperform broader equity indices over the past five years.

But such outperformance is unlikely to prove persistent. Environmental liability and litigation risk are increasingly priced into coal companies’ valuations, a drag on long-term performance.

The Middle East energy shock and U.S. executive actions in favor of the coal industry could continue to draw some investor interest, but a temporary demand boost will not resolve the industry's structural challenges.

Unless coal companies find creative ways to raise profitability, their recent outperformance is likely to prove fleeting - as coal equity prices, now below pre-war levels, already suggest.

(The views expressed here are those of Preetha Jenarthan, a Senior Research Associate, and Dr. Gautam Jain, a Senior Research Scholar, at the Center on Global Energy Policy (CGEP) of Columbia University’s School of International and Public Affairs (SIPA).)