MidEast war recasts hydrogen as energy security hedge

The market’s growth will likely depend on government support.

The war in the Middle East has shifted the hydrogen debate from climate to energy security, as disruption to Gulf hydrocarbon exports forces markets to reassess alternatives, according to Wood Mackenzie.

Before the conflict, the Strait of Hormuz carried roughly 20% of global liquefied natural gas, 25% of internationally traded ammonia, and 37% of urea exports.

The drop in traffic through the strait sent prices for these commodities sharply higher, and many remain above pre-war levels.

At current European gas benchmark prices of around $17 per million British thermal unit, whilst conventional grey ammonia costs roughly $800 per tonne to produce.

Wood Mackenzie estimates the delivered cost of low-carbon ammonia in Europe at $700 to $1,100 per tonne— meaning the lowest-cost green projects are now price-competitive with conventional supply.

However, most of those low-carbon projects are not yet online, and when the Strait of Hormuz reopens, European gas prices are expected to fall sharply, eroding that competitiveness again.

Still, hydrogen and its derivatives — ammonia, methanol — offer a potential way to diversify supply chains away from hydrocarbon-dependent routes, particularly for industries like refining and fertilisers that already run on hydrogen.

Furthermore, China has named green hydrogen a strategic priority in its 15th Five-Year Plan and holds over half of the global green hydrogen capacity that has reached a final investment decision.

Wood Mackenzie head of hydrogen research Murray Douglas said that the market’s growth will likely depend on government support for at least the next 15 to 20 years.

Cost reductions are projected as the industry scales, but unsubsidised competitiveness with hydrocarbons remains a distant prospect