Increased ocean temperature associated with climate change is especially intensified in coastal areas and its influence on microbial communities and biogeochemical cycling is poorly understood. In this study, we sampled a Baltic Sea bay that has undergone 50 years of warmer temperatures similar to RCP5-8.5 predictions due to cooling water release from a nuclear power plant. The system demonstrated reduced oxygen concentrations, decreased anaerobic electron acceptors, and higher rates of sulfate reduction. Chemical analyses, 16S rRNA gene amplicons, and RNA transcripts all supported sediment anaerobic reactions occurring closer to the sediment-water interface. This resulted in higher microbial diversities and raised sulfate reduction and methanogenesis transcripts, also supporting increased production of toxic sulfide and the greenhouse gas methane closer to the sediment surface, with possible release to oxygen deficient waters. RNA transcripts supported prolonged periods of cyanobacterial bloom that may result in increased climate change related coastal anoxia. Finally, while metatranscriptomics suggested increased energy production in the heated bay, a large number of stress transcripts indicated the communities had not adapted to the increased temperature and had weakened resilience. The results point to a potential feedback loop, whereby increased temperatures may amplify negative effects at the base of coastal biochemical cycling.