A new report from the International Energy Agency (IEA) has highlighted how ongoing disruptions in the Middle East are affecting global markets for fertilisers, chemicals, refined products, and other hydrogen-based commodities. The findings underline the growing importance of building more diversified and resilient supply chains, particularly as countries seek to strengthen their energy security and reduce dependence on a limited number of suppliers.
According to the IEA’s latest Global Hydrogen Review, the conflict in the Middle East has exposed vulnerabilities in industries that rely heavily on hydrogen and hydrogen-derived products. These products play a critical role in sectors such as agriculture, refining, and chemical manufacturing, making disruptions to their production and trade a concern for economies around the world.
The report notes that the current situation has renewed interest in low-emissions hydrogen and hydrogen-based fuels as long-term solutions for improving energy security. However, while progress is being made, production remains far below the levels needed to address immediate supply challenges.Global demand for hydrogen continued to grow in 2025, surpassing 100 million tonnes for the first time.
Production of low-emissions hydrogen also increased significantly, rising by 20 per cent to nearly one million tonnes. Despite this growth, the sector continues to face several obstacles, including high production costs, uncertain market demand, regulatory complexity, and insufficient infrastructure. These challenges are slowing deployment and making it increasingly difficult for countries to achieve the hydrogen targets they have set for 2030.
IEA Executive Director Fatih Birol said the crisis has demonstrated how interconnected global economies are through trade in hydrogen-based products. From fertilisers and fuels to industrial feedstocks, many industries depend on reliable international supply chains. He noted that while low-emissions hydrogen has the potential to strengthen energy security and diversify energy systems over time, achieving this will require stronger policy support and much faster deployment than is currently taking place.
One of the sectors most affected by recent disruptions has been the fertiliser industry. The Middle East accounts for roughly one-sixth of global hydrogen production and is a major exporter of ammonia, urea, methanol, and refined petroleum products. Production interruptions, export constraints, and shipping disruptions have created shortages and increased price volatility in international markets.
The report highlights that global urea prices doubled between January and May 2026 due to supply disruptions, rising natural gas costs, and export restrictions. Higher fertiliser prices have raised concerns about agricultural productivity and food security, particularly in countries that depend heavily on imported fertilisers to support their farming sectors.
While low-emissions hydrogen production is expected to reach another record level in 2026 and account for more than one per cent of global hydrogen production for the first time, investment activity in the sector has slowed.
The report points to delays in final investment decisions and a shrinking pipeline of future projects as signs that developers remain cautious about committing capital under current market conditions.Although many governments continue to support hydrogen development through incentives and policy frameworks, low-emissions hydrogen and hydrogen-based products remain considerably more expensive than conventional alternatives in most regions.
As a result, many projects have been delayed or cancelled. The total pipeline of announced low-emissions hydrogen projects expected by 2030 has fallen by around 25 per cent over the past year, declining to 27 million tonnes. At the same time, projects that have either secured final investment decisions or are considered highly likely to be operational by 2030 have dropped from 10 million tonnes to just over 6 million tonnes.
A lack of reliable demand remains one of the industry’s biggest challenges. New offtake agreements signed during 2025 remained at roughly the same level as the previous year, and only about 20 per cent of those agreements included firm contractual commitments. This uncertainty makes it difficult for developers and investors to justify large-scale investments in new production facilities.China continues to dominate the global electrolyser market and accounted for approximately 75 per cent of all new installations in 2025.
As a result, worldwide installed electrolyser capacity doubled to 4 gigawatts. However, the report also identifies signs of slowing momentum in the Chinese market, with investment decisions for new electrolysis projects declining for the first time. Policymakers are expected to address this through support measures introduced in late 2025, which could help revive growth over the coming years.
In Europe, hydrogen development is being supported through funding programmes and regulatory requirements, particularly within the refining sector. However, slow implementation of some key regulations continues to delay investment decisions and project execution. Meanwhile, countries such as the United States, India, and Japan are making progress, though uncertainty surrounding incentives, regulations, and future demand remains a challenge.
The report also draws attention to Africa’s long-term potential in the hydrogen economy. The continent possesses abundant renewable energy resources that could support large-scale production of low-emissions hydrogen in the future. However, development remains at a very early stage. Currently, Africa produces only around 6,000 tonnes of low-emissions hydrogen annually, and none of the 34 projects announced for operation by 2030 have yet reached a final investment decision.
Despite these challenges, the IEA believes hydrogen could play an important role in Africa’s economic development. Increased domestic hydrogen production could support local fertiliser manufacturing, improve food security, and help countries move into higher-value industrial activities such as green steel production.
To realise these opportunities, however, governments and investors will need to address financing challenges and ensure that hydrogen development is aligned with broader economic and industrial growth strategies.Overall, the report highlights a sector with significant long-term potential but facing considerable near-term hurdles.
While global interest in low-emissions hydrogen continues to grow, stronger policy frameworks, greater investment certainty, and more robust demand will be needed to accelerate deployment and establish hydrogen as a major contributor to future energy security and industrial decarbonisation.
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