The global hydrogen market exceeded 100 million tonnes in 2025, yet the sector’s vulnerability became increasingly visible as disruptions in the Middle East affected fertilizer, chemicals and refined product supply chains.
According to the International Energy Agency’s (IEA) latest Global Hydrogen Review, the crisis has underscored how dependent major industries remain on hydrogen based commodities produced and traded through concentrated regional networks.
The disruption has renewed attention on hydrogen as a potential tool for strengthening energy security, but the report also highlights a major gap between strategic ambitions and market reality. Low emissions hydrogen production grew by 20% in 2025 to almost 1 million tonnes, but remains far below the scale needed to replace conventional hydrogen production or provide an immediate buffer against supply shocks.
The Middle East plays an outsized role in global hydrogen based product markets. The region accounts for around one sixth of global hydrogen production and is a major exporter of ammonia, urea, methanol and refined products. These materials are essential inputs for agriculture, petrochemicals and industrial manufacturing. Disruptions to production facilities, exports and shipping routes have contributed to tighter markets and increased price volatility.
Fertilizers have been among the most affected sectors. Urea prices doubled between January and May 2026 as supply disruptions combined with higher natural gas prices and export restrictions tightened global availability. The impact extends beyond chemical markets, with higher fertilizer costs creating additional pressure on food supply chains, particularly in countries reliant on imported agricultural inputs.
The situation highlights a structural challenge in global hydrogen trade: many economies depend not only on hydrogen itself but on hydrogen derived products produced in geographically concentrated regions. While diversification through new hydrogen production hubs could improve resilience, it also introduces cost challenges because low emissions alternatives remain significantly more expensive than conventional fossil based production.
Low Emissions Hydrogen Expansion Faces Economic Barriers
Despite growing political support, the low emissions hydrogen sector is facing slowing investment momentum. The IEA estimates that low emissions hydrogen production will reach a new record in 2026 and surpass 1% of global hydrogen production for the first time. However, announced projects targeting operation by 2030 have declined by roughly one quarter compared with the previous year, falling to 27 million tonnes.
The decline reflects delays, cancellations and uncertainty surrounding project economics. Projects that have reached final investment decision or have a strong probability of becoming operational by 2030 have fallen from around 10 million tonnes in the previous assessment to just above 6 million tonnes.
The central issue remains demand certainty. New offtake agreements for low emissions hydrogen stayed limited in 2025, with only around 20% of newly contracted volumes supported by firm commitments. Developers continue to identify unclear demand signals as one of the largest barriers to investment.
This challenge is particularly significant because hydrogen projects require large upfront capital expenditure and long development timelines. Without guaranteed buyers, producers face difficulties securing financing, while industrial consumers remain hesitant to commit to higher cost hydrogen without regulatory certainty or financial support.
Electrolyzer Growth Continues, but Investment Signals Weaken
Electrolyzer deployment continues to expand, although momentum is becoming uneven across markets. China accounted for approximately 75% of new electrolyzer installations in 2025, helping global installed capacity double to 4 gigawatts.
However, the IEA notes early signs of a slowdown, with investment decisions for new electrolysis based hydrogen projects declining for the first time. Policy support introduced in late 2025 may encourage renewed growth, but the shift suggests that equipment deployment alone will not resolve the broader market challenges.
China’s position illustrates a wider trend in the hydrogen sector: manufacturing capacity and technology deployment are advancing faster than commercial demand. Electrolyzers can increasingly be produced at scale, but projects still depend on affordable renewable electricity, infrastructure availability and customers willing to pay a premium for lower carbon hydrogen.
Europe has continued advancing hydrogen projects through regulatory mechanisms and industrial support programmes, particularly in refining where existing hydrogen demand provides a clearer market pathway. However, delays in implementing key regulations have slowed investment decisions and project development.
North America, India and Japan are also making progress, although uncertainty around incentives, future demand and regulatory frameworks continues to influence investor confidence.
Africa represents one of the most significant long term opportunities but also demonstrates the gap between potential and deployment. The continent has substantial renewable energy resources that could support competitive low emissions hydrogen production, yet current output remains limited. Only around 6,000 tonnes of low emissions hydrogen are produced in Africa today, and none of the 34 announced projects targeting operation by 2030 have reached final investment decision.
The IEA notes that hydrogen could support industrial development in African economies by enabling domestic fertilizer production, reducing reliance on imports and creating opportunities in industries such as green steel. However, achieving these outcomes depends on addressing high financing costs and ensuring hydrogen strategies align with broader economic development goals rather than focusing only on export opportunities.
