Can the Gulf become a global hydrogen hub amid the Iran–US war?

The Gulf has spent decades selling oil and gas to the world. Now its governments want to sell something else: low-carbon hydrogen. It is an appealing prospect. The region has plenty of sunshine, deep pockets and companies that know how to build energy projects at scale. But the Iran–US war has brought an uncomfortable question to the surface. What good is producing a cleaner fuel at a competitive price if ships cannot move safely, investors hesitate and customers worry about delivery? The conflict has not made the Gulf’s hydrogen plans irrelevant. It has shown how much those plans still depend on the security of the energy system they are supposed to help transform.

A promising business, with strings attached

The GCC has genuine advantages. Solar power is becoming cheaper, and sunlight is abundant across much of the Arabian Peninsula. That creates opportunities for green hydrogen, made by using renewable electricity to split water. The region also has large natural gas reserves, which could support blue hydrogen if producers capture a substantial share of the emissions and keep methane leakage under control. Neither route is automatically cheap or clean. Electrolyzers, desalination, storage and transport cost money, while carbon capture has to perform as promised. Still, few regions can pursue both routes on this scale.

The Gulf can also draw on experience that newer energy exporters lack. Its ports, industrial zones, engineering firms and state energy companies already serve global markets. Ammonia, a potential carrier for hydrogen exports, is familiar to parts of the regional chemicals industry.

Sovereign wealth funds can help shoulder the expense of projects that take years to pay off. This does not mean an LNG terminal can simply be turned into a hydrogen terminal. New equipment and safety systems are needed. But the region is not starting from scratch.

There is a larger economic motive behind the excitement. Gulf governments want to preserve a place in international energy trade while creating jobs and industries beyond crude oil. Hydrogen could feed local steel, fertilizer and chemical production, not just ships bound for Europe or Asia. Forecasts point to substantial hydrogen output from the wider Middle East and North Africa over coming decades. Yet forecasts are not purchase orders. The future market depends on whether customers will pay more for lower emissions and whether producers can deliver at a price that makes sense.

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Big projects, different priorities

Saudi Arabia has made the NEOM Green Hydrogen project its most visible bet. Renewable electricity will power hydrogen production, with the output converted into ammonia for export. The kingdom is also exploring blue hydrogen through its gas industry and carbon capture plans. The UAE is pursuing several production routes under a national strategy that aims for about 1.4 million tonnes of low-carbon hydrogen a year by 2031. It hopes industrial centers such as Ruwais can connect production with customers at home and abroad.

Oman has leaned further toward green hydrogen. Through Hydrom, it has been allocating land to developers and aims to produce 1 million to 1.5 million tonnes annually by 2030. Its location gives it another advantage: ships leaving Duqm do not have to pass through the Strait of Hormuz. Qatar, meanwhile, is using its gas expertise to develop blue ammonia. There is no single GCC model. Each country is trying to make hydrogen fit its existing resources and economic plans.

Nor are Gulf states moving in lockstep. They compete for many of the same European and Asian customers, even as they talk about regional leadership. Rivalry may encourage investment, but it could also leave the region with more proposed capacity than buyers need.

Importers themselves are still deciding whether to purchase hydrogen, ammonia for industrial use, or products such as steel made with cleaner fuels. Getting that choice wrong could leave exporters with costly facilities and too few customers. For governments accustomed to selling oil into a mature world market, this is a very different business: the market they hope to supply is still taking shape, and prices remain uncertain.

For all the announcements, the hardest part has never been drawing up production targets. It has been finding buyers. Hydrogen remains costly to make, move and use, and potential importers have been cautious about signing contracts at prices that would support new projects. Developers also need large amounts of power and water, specialist equipment and clear rules for measuring emissions. These problems existed before the war. They explain why some projects have moved toward construction while others remain on paper

The war changes the calculation

The Iran–US conflict has made one weakness harder to overlook: exporting hydrogen from the Gulf will depend heavily on maritime security. Threats around the Strait of Hormuz can push up insurance costs, complicate shipping schedules and unsettle customers. Hydrogen is unlikely to move mainly as a gas in ordinary tankers. Much of it would travel in the form of ammonia or other derivatives, using shipping networks exposed to regional tensions. A producer might offer an attractive factory-gate price and still struggle to promise reliable deliveries.

The war also affects what comes into the Gulf. Developers need imported electrolyzers, turbines, electrical equipment and other specialized components. Disruption can delay construction and raise costs. Investors notice. These projects require huge sums upfront, often with returns stretched over decades. If lenders demand a higher risk premium, cheap sunshine will not compensate for expensive finance. And even facilities outside Hormuz cannot assume they are beyond the reach of a wider regional confrontation.

There is a possible upside, though it should not be exaggerated. Higher oil and gas prices can make alternatives look more appealing. Importing countries worried about disruptions may seek a wider mix of energy suppliers. That could increase interest in low-carbon hydrogen. But interest is not the same as a signed contract. If Gulf shipments appear vulnerable to the same conflict that threatens existing oil and gas trade, buyers may look elsewhere or delay their decisions. The war strengthens the argument for diversifying energy supplies while making Gulf hydrogen harder to finance and market.

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What would make the ambition credible?

The GCC cannot eliminate geopolitical risk, but it can reduce its exposure. Export facilities outside Hormuz, including Duqm and ports on Saudi Arabia’s Red Sea coast, offer useful alternatives. More local manufacturing could ease dependence on imported equipment. And developing demand at home, particularly in fertilizers, refining and steel, would give producers customers even when overseas markets are unsettled. None of this removes the need to control costs. It makes the hydrogen industry less dependent on one shipping route or one group of buyers.

Governments should also be more selective. Projects with realistic costs, credible emissions accounting and committed customers deserve priority over impressive capacity announcements. International standards matter because buyers need to know what they are purchasing. Financing arrangements must account for possible interruption, rather than treating regional security as somebody else’s problem. A drawn-out conflict could slow investment and pull public money toward immediate security needs. Peace would improve confidence, but it would not fix hydrogen economics overnight.

The Gulf has a serious chance to become an important supplier of low-carbon hydrogen. Its resources and industrial experience are real, not marketing inventions.

What the war has exposed is the gap between being able to produce hydrogen and being able to sell it reliably. The countries that close that gap, with secure routes, paying customers and projects that survive financial scrutiny, will lead.

The rest may find that the global hydrogen market is less interested in grand plans than in deliveries that arrive.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.