Eight weeks of war in the Persian Gulf have done something a decade of climate summits could not: make green hydrogen look cheap.

The US-Israeli military campaign against Iran, now in its 55th day, has torn through global energy markets. Tehran’s closure of the Strait of Hormuz — the chokepoint through which roughly a fifth of the world’s daily oil supply transits — combined with Iranian strikes on gas facilities in Qatar, has sent fossil fuel prices surging. Brent crude has climbed approximately 13 percent since hostilities began on February 28, according to RFI. European natural gas benchmark prices rocketed more than 40 percent in a single day early in the war, breaching €60 per megawatt-hour — levels not seen since the aftermath of Russia’s invasion of Ukraine.

That price shock is compressing what was once a stubborn cost gap. Grey hydrogen — the natural gas-derived industry standard — costs $1.20 to $1.80 per kilogram in normal conditions, according to industry data compiled by Energy Solutions. Green hydrogen, produced by splitting water with renewable electricity, costs $2.50 to $5.00 per kilogram unsubsidized. Those grey hydrogen figures assume stable gas prices. Stability is now a casualty of war.

“The war-driven surge in oil and gas prices is narrowing the cost gap between grey and green hydrogen, creating conditions for greater uptake,” said Charith Konda, an energy specialist for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA).

Green hydrogen has long been touted as a cornerstone of Asia’s net-zero transition, with applications spanning steelmaking, fertiliser production, shipping, and aviation. For years, the economics refused to cooperate. The war has changed the math.

Asia’s twin bets

China invested $3.7 billion in green hydrogen production last year — more than double US levels, according to Rystad Energy — and Beijing’s latest five-year plan elevated the fuel to “frontier industry” status alongside quantum computing and AI-enabled robotics. Rystad projects 2.6 million tons of annual capacity online by 2031, representing $26 billion in cumulative investment. The flagship is already operational: the $2 billion Chifeng complex in Inner Mongolia, operated by Envision Energy, delivered its first green ammonia cargo to South Korea’s Lotte Fine Chemical in February.

India is moving even more aggressively, driven by energy security rather than climate ambition. New Delhi has committed $2.1 billion in subsidies toward a target of 5 million metric tons of green hydrogen annually by 2030 — roughly five times the current size of the entire global market, according to Reuters. India’s hydrogen supply depends overwhelmingly on imported natural gas, a vulnerability laid bare by successive shocks from the Middle East, Ukraine, and the pandemic. The subsidies are paired with offtake guarantees from refineries and steelmakers, making projects bankable from day one.

Meanwhile, the West — which led the early charge on green hydrogen — has quietly retreated from its most ambitious targets as costs proved stickier than anticipated. China and India, neither traditionally at the forefront of climate policy, are now forcing a market into existence through political will and scale.

A grim catalyst

The arithmetic is bitter. A conflict fought over control of hydrocarbons is, by making those hydrocarbons expensive and unreliable, accidentally building the strongest economic case yet for leaving them behind. History offers precedent: France’s vast nuclear programme was born from the oil shocks of the 1970s. This crisis could do the same for green hydrogen across Asia.

None of which offsets the human toll. Fifty-five days of war have reportedly killed civilians, displaced populations, and left diplomatic efforts stalled. Any market signal, however significant, exists in the shadow of that suffering.

As IFRI energy adviser Olivier Appert put it, the current crisis “justifies the need to reduce dependence on fossil fuels” — though he warns it risks swapping one dependency for another, given China’s grip on rare earths and clean-energy supply chains.

The war will end. The cost curves it has bent may not.

Sources