It's tight! Maybe a bench/sofa on the wall under the sconces and one or two chairs opposite with a coffee table or hassock between. These are pricey, but they might give you some ideas and they look comfy for enjoying the fire.

You might consider doing something built-in on the wall with the sconces, to give it a library-type feel. Bench seating with throw pillows and then bookshelves built around it would make it a cozy reading nook. And then perhaps a bench on the half wall as well. You can make the base with drawers or cabinets for storing extra pillows or a throw or two to bundle up in. As decoenthusiaste mentioned, a coffee table - probably glass so you wouldn't obstruct the view of the fire - would finish the look.

Why did you put the pony wall there?

Two over-stuffed chairs with one big ottoman between the two chairs. this space is made for one or two people at most to share. make it comfy to sit and read a book or just talk.

Thank you so much for the ideas! We are looking for a couple low profile armchairs to create a cozy home feel.. Not too sure on what to get being high traffic areas.

Can you remove the pony wall?