Global Production of Hydrogen Faces Disruption Due to the West Asia Conflict: Report

A new report by the International Energy Agency (IEA) revealed that the global market for fertilisers, chemicals, and refined products are facing significant disruptions due to the conflict in West Asia. 

The region accounted for around one-sixth of global hydrogen production and plays a dominant role in the trade of hydrogen-derived products such as ammonia, urea, and methanol.

According to the report, since the closure of Strait of Hormuz has disrupted global supplies of these products, contributing to the shortage and price volatility across fertiliser and chemical markets. Urea prices doubled between January and May 2026 increasing cost for farmers and raising concerns about food security, particularly in import-dependent countries. 

Expansion of Low-Emission Hydrogen Remains Slow

The report found that the demand for hydrogen crossed the 100 million tonne mark in 2025 and the growth remained concentrated in traditional sectors such as oil refining, chemicals, and industry.  Low-emission hydrogen increased by 20% in 2025 to nearly 1 million tonnes, accounting for just 1% of hydrogen output globally. The report said the expansion of low-emission hydrogen remains too slow to meet the governments’ ambitions for the end of the decade. 

The report argued that low-emissions hydrogen could eventually help countries diversify energy supplies and reduce dependence on imported fossil fuels. However, it warned that hydrogen is not yet available at sufficient scale to ease immediate energy security concerns.

Demand Remains the Biggest Challenge

Investment momentum in the sector also weakened during 2025. The pipeline of announced low-emissions hydrogen projects expected by 2030 shrank to 27 million tonnes per year due to project delays and cancellations. The volume of projects considered likely to be operational by the end of the decade has fallen from around 10 million tonnes in last year's review to just over 6 million tonnes, the report said. 

Demand remained the biggest challenge for the industry. New offtake agreements for low-emissions hydrogen remained largely unchanged in 2025 at around 1.7 million tonnes, with only one-fifth backed by firm contractual commitments. The report identified high costs, uncertain demand, regulatory complexity and insufficient infrastructure as key barriers slowing deployment.

China continued to dominate global electrolyser deployment, accounting for nearly three-quarters of new installations in 2025. Global installed electrolysis capacity doubled during the year to more than 4 GW. However, the report noted signs of market consolidation in China due to excess manufacturing capacity and intensifying competition.

India was highlighted as an emerging market for clean hydrogen. The report said that tenders by the Solar Energy Corporation of India and several refineries have resulted in offtake contracts, though future progress will depend on the availability of government incentives and greater regulatory clarity.

In Africa, where nearly 600 million people still lack access to electricity, the continent has abundant renewable energy resources and significant potential for low-emissions hydrogen production, only one of the 31 announced projects targeting 2030 has reached a final investment decision. High financing costs remained the principal obstacle, as per the report. 

Way Forward

The report called on governments to update hydrogen strategies, strengthen demand-creation policies, maintain targeted production support and speed up the development of hydrogen infrastructure. It also urged advanced economies to support emerging markets in building domestic hydrogen industries and moving up the value chain for hydrogen-based products.

"Countries are looking for ways to make their energy systems more resilient and diversified. Low-emissions hydrogen can play an important role in those efforts over time, but stronger policy support and much faster deployment will be needed before it can make a meaningful contribution at scale," said Faith Birol, Executive Director of IEA.