Hormuz crisis redraws green hydrogen map, identifying new energy transition winners

Escalating tensions in the Strait of Hormuz are not only impacting oil and natural gas prices but are also rapidly reshaping the global green hydrogen market. This strategic waterway, crucial for nearly a fifth of global oil consumption and significant liquefied natural gas and ammonia exports, has seen its traffic disrupted by rising tensions between Iran, Israel, and the United States.

The immediate effect has been a spike in fossil fuel prices, temporarily reviving interest in hydrocarbons. However, the crisis has also spurred greater investment in green hydrogen and green ammonia. The events underscore the vulnerability of global supply chains dependent on narrow maritime passages, prompting governments and investors to re-evaluate long-term energy security and seek alternative sources.

Green hydrogen, produced via electrolysis using renewable energy, is seen as a key pillar of the energy transition, capable of replacing fossil fuels in hard-to-electrify industries like steel and fertilizer production. While its development has faced challenges due to high costs and insufficient infrastructure, the Hormuz crisis is altering this landscape. The fertilizer industry, heavily reliant on ammonia (a key component of nitrogen-based fertilizers often produced from natural gas), is particularly affected, as about 23% of global ammonia trade passes through the Strait.

Green ammonia offers a solution that reduces carbon emissions and lessens dependence on both fossil fuels and vulnerable trade routes. In response to growing concerns over food and energy security, several nations, including Morocco, Egypt, India, and Australia, are vying to become major suppliers in this evolving market, seeking to capitalize on the new geopolitical context.