A major incident was declared and more than 100 firefighters were sent to tackle the incident, off Lower Horseley Fields, after the fire broke out at about 9pm on Monday.
At its height, 28 fire engines were on the scene, with the brigade using a thermal imaging drone to identify hotspots in the blaze, which at one stage covered a fifth of a square kilometre.
Water had to be pumped from the nearby canal, near the junction where the old main line and Wyrley and Essington canals meet.
Wolverhampton Council said contingency plans were prepared to transport residents to a leisure centre by Wolverhampton Council, in partnership with police and the fire service, but the evacuations did not need to take place.
Investigations into the blaze have now started but are not expected to conclude for several days, West Midlands Fire Service has confirmed.
A number of road closures were also put in place following the outbreak of the fire, with some roads expected to remain shut today.
Among those, Walsall Street was still cordoned off by police yesterday at its junction with Commercial Road, where The Harp Inn is situated.
Shellie Ryan, who works behind the bar, said the pub had to close early on Monday after the fire broke out.
She said: “The pub usually closes at about 11pm but we had to close between 9.30pm and 10pm.
“It was terrifying at the time.
“We’ve been able to open up again today but it will affect trade because you don’t know if people will think you are not open with the road being closed.”
John Jowett, who lives at The Harp Inn, said: “All you could see were flames that were 50-60ft high.
“Within half an hour the police came and they cordoned it off and said we had to leave the pub.
“We heard the fire was at the coal yard at first, then it came straight the way across.
“I stopped at my mates but I had a message in the morning at about 5.55am saying I could go back in the pub.”
Denise Simms, who lives in Walsall Street, said: “It was about 10pm and my daughter phoned me.
“She said ‘can you see all the smoke?’. I came out and saw all the smoke and fire.
“There was an explosion too and we thought it might have been at BOC at first. It was very scary.
“The street was very rowdy, this one car was making a whole heap of noise. People were turning up and parking in the street and walking down the bottom.
“The police had to move them back.
“I was watching it until about 1am. We thought we would have to evacuate but no one came down.”
Another resident of Walsall Street, who did not want to be named, said: “It was 9.30pm when it was really noticeable.
“The flames were towering over the building on the corner.
“All of it was lit up.
“There was the fire brigade, ambulance and police out there. I thought they were going to come and try and evacuate us.”
A resident of nearby Colliery Road said: “My husband saw the fire, he thinks it spread to the old coal building.
“He’s never seen anything like it, the smoke knocked it out of him.”
The blaze also affected several businesses in the area, with some not able to open yesterday and others had delivery issues due to road closures.
Steve Downes, manager at DB Cargo in Knowles Road, Wolverhampton, said: “We got told on Tuesday night that it started in the building next door.
“Everyone has been told that they have to stay away from work and wait for a call.
“I think it was one of our overnight workers who first called it in.”
Manjit Chagger, who owns Snow Hill Motors in Colliery Road, added: “It’s had an impact on us, there’s hardly anyone coming in today.”
An engineer at the firm, who didn’t want to be named, said he could smell the fire from his home in Sedgley.
Steve Phillips, owner of Interplumb in Willenhall Road, said it had affected deliveries to the firm.
He added: “It’s horrible, I’ve had all my deliveries stopped. I was supposed to break up on Friday but I don’t think that is going to happen now, I just hope it doesn’t spread to the next buildings.”
Dal Singh, who owns Bargains Vans in Willenhall Road, said it was “chaos” getting into work yesterday morning.
“I had to clean all the vans again, it’s lucky it didn’t spread to some of the nearby buildings as well,” he added.
“I heard a guy as far as Stafford could smell the smoke.”
Benjamin Rushton, a resident of Colliery Road, said a number of fires have broken out at the building where the fire started.
He said he believed it to be a listed building.
He said: “My partner literally lives round the corner and I was seeing my son at the time – and we could see it out the back garden.
“My dad has got a storage lockup (near the fire) so I went out to check on that as well.
“That building, there’s been a number of fires there.
“I’ve had to call the fire brigade before because there’s (alleged drug users) who light fires to keep warm and it’s a listed building as well, but it’s meant to be abandoned.
“I know there was a fire there last year.
“I called them in the summer of 2015 and I was waiting for the bus and thought someone was in there, I could see bits of smoke there and so I called the fire service.”
The 26-year-old said it was lucky the blaze, which he noticed between 10pm to 10.45pm, had not spread to the left and hit Jones’ Skips where there would have been mounds of plastic and paper there.
Pat McFadden, MP for Wolverhampton South East, thanked the firefighters for their efforts.
He said: “This has been a major fire and I am enormously grateful to the firefighters who have worked all night to try to bring it under control.
“There was an evacuation alert locally and I hope local residents are able to resume their normal lives as soon as possible.”
Julie Malone, group commander at West Midlands Fire Service, said: “We are working with other agencies including police and local businesses to resolve the incident as quickly as possible.”