War in the Middle East has reshaped near-term energy market expectations, with direct implications for hydrocarbon supply affecting power sectors across liquified natural gas (LNG) imports, oil imports and spot gas-dependent economies, mainly in Europe and Asia. While Middle Eastern countries retain access to abundant domestic fossil fuels, the effective closure of the Strait of Hormuz and the crisis extends disruption beyond hydrocarbons. The combination of conflict proximity, supply chain vulnerability, capital diversion, and institution resilience are critical for renewables deployment. Rystad Energy analyzes how the conflict is affecting renewable energy deployment across key Middle Eastern markets.
The crisis is expected to result in a net delay of between three and 12 months across the active renewable energy pipeline in the Middle East, while simultaneously strengthening the medium to long-term strategic commitment to the energy transition. The overall effect is a short-term delay followed by a sharper medium-term acceleration in Saudi Arabia, the UAE, Oman, and Turkiye, while Qatar, Kuwait, Iraq, Bahrain, and Jordan are expected to face moderate delays with recovery contingent on market stabilization. Additionally, Iran, Israel, Syria, Lebanon, and Yemen remain high risk and are likely to face prolonged delays in renewables deployment (Figure 1).
Supply chain disruption
There is a clear disruption across key maritime routes that is already pushing back project timelines. While other regions have registered high module imports due to China's elimination of the VAT export rebate on 1 April, the Middle East region lagged behind. The March 2026 solar PV imports collapsed against 2025 monthly averages across every Persian Gulf market- the UAE fell 608 MW from 767 MW to just 160 MW, Saudi Arabia dropped 625 MW from 704 MW to 80 MW, and Oman fell to zero from 77 MW. The contrast with Türkiye importing 248 MW (+166 MW above its 2025 average) and Israel at 220 MW (+118 MW), reflecting their independence from Hormuz and Red Sea routing (Figure 2).
The impact is more severe because multiple cost pressures have materialized simultaneously. The freight rates for the Asia-Mediterranean route are up from $2,826/FEU in late February to $3,594/FEU by early April. Additionally, China's elimination of the VAT export rebate on 1 April added a direct 9% cost impact on module pricing, while silver prices in the USD 70–80/oz range are pushing up cell costs, prompting OEM suppliers, EPC contractors and developers to revisit signed contracts, repricing risk, and consider redirecting capital toward more stable, lower-risk markets within the Middle East.
The region's highly competitive auction market, which results in world-record bids in the range of USD 10.5 - USD 20/MWh, gives a thin margin to the developers. To achieve this, the CAPEX intensity for these projects is already at a lower end. Multiple cost pressures and with war risk premium now being embedded into project finance, EPC contractors are repricing force majeure and logistics exposure into new bids. Countries like Kuwait, progressing to awarding their first large-scale solar projects totaling 1.6 GW, are particularly vulnerable to this repricing. For projects that have already reached financial close across the Middle East, the result is margin compression.
Middle East solar module manufacturing capacity is expected to grow from 4.7 GW in 2025 to 35.8 GW by 2030 — a sevenfold expansion in five years. Türkiye, already plateaued at 22.2 GW of domestic manufacturing capacity from 2026 onward, is effectively import-independent for solar modules and fully insulated from any future Hormuz disruption.
The financial incentive for renewables deployment for oil and gas-exporting Gulf states such as the UAE, Saudi Arabia, Qatar, Kuwait, and Iraq has strengthened under this crisis. At more than $90 per barrel of Brent crude oil and between $15 and $20 per million British thermal units of LNG, every megawatt of solar or wind deployed domestically frees up hydrocarbons for export at elevated prices. The opportunity cost of burning liquids/gas in a domestic power station has never been higher. However, the effective closure of the Strait of Hormuz remains a significant constraint for countries reliant on the route for exports. Gulf renewables programs are facing logistical and financial delays, not strategic ones, and striking the right balance between restoring hydrocarbon exports and renewables deployment will result in an optimal outcome.
Authors:
Nishant Kumar
Analyst, Renewables & Power EMEA Research
nishant.kumar@rystadenergy.com
Marius Mordal Bakke
Head of Solar Research
marius.bakke@rystadenergy.com
Fabian Rønningen
Head of Renewables & Power EMEA Research
fabian.ronningen@rystadenergy.com
This article draws on insights from our Rystad Energy commentary. The full analysis is available to clients via the Client Portal.
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