The Arab World’s Next Big Export Isn’t Oil. It’s Green Hydrogen.

posted on: Jul 1, 2026

Photo by John Middelkoop on Unsplash 

By Shayla Frank / Arab America Contributing Writer

Why the Gulf can make green hydrogen cheaply

On the Red Sea coast of northwest Saudi Arabia, one of the planet’s biggest industrial projects is almost complete. By early 2026 it stood at 90 percent, solar fields and wind turbines feeding banks of electrolysers. It turns sunlight and seawater into a fuel that burns to nothing but water. But it doesn’t come without a price. In total, the bill runs to nearly $8.4 billion, all of it staked on the premise that the Gulf can keep selling the world energy long after the world stops buying oil.

The fuel is green hydrogen. Hydrogen itself is nothing new, in fact the industry has leaned on it for decades, most of it made from natural gas in a process that emits carbon dioxide. However, what makes this version “green” is the method. Renewable electricity splits water into hydrogen and oxygen through electrolysis. The only emissions come from building the equipment and don’t come from burning fuel.  Because hydrogen is light and awkward to ship, most projects convert it into green ammonia, which is a denser carrier that ordinary tankers can move across oceans.

The Gulf has reasons to think it can lead. The sun there works harder than almost anywhere. Solar farms run 1,800 to 2,000 full-load hours a year, against Germany’s 950 to 1,100. Competitive auctions have pushed prices to record lows, near 1.04 US cents per kilowatt-hour in Saudi Arabia.Furthermore, when you add vast open land and deep reserves of state capital to decades of practice shipping energy across the world, this gamble begins to make more sense. Peer-reviewed estimates put eventual Gulf production at $0.80 to $1.60 a kilogram by 2030. That is well under the more than $3 it costs in Europe or Japan today.

The supply is the easy part

The ambition has already taken physical shape. The Saudi plant, known as NEOM, will make 600 tonnes of hydrogen a day, with first output in 2027. At full tilt that becomes up to 1.2 million tonnes of green ammonia a year. Oman has reached further still, setting aside 50,000 square kilometres, an area the size of Slovakia. Those projects aim to yield as much as 8.5 million tonnes of hydrogen a year by 2040. The United Arab Emirates, Egypt and Morocco have each launched programs of their own.

Supply is the part the Gulf can deliver on its own. It has some of the cheapest solar power in the world, and deep reserves of state money behind it. Demand, however, is harder, and these plants send almost all their output abroad. For now, cheaper gas and pricier electrolysers leave green hydrogen costing more than the fossil fuel it would replace. That gap has lately widened rather than closed and reversing it is the whole pitch, yet the economics moved the wrong way first. The International Energy Agency now expects half of the world’s announced projects to slip. Realistic start dates are drifting toward 2035 or 2040 rather than 2030.

The green hydrogen wager

The strain already shows in the projects themselves. NEOM, the most secure of them, still cannot say for certain who will buy what it makes. In Egypt, a BP-led venture could not find foreign buyers and has fallen back on the domestic market. Of the country’s many announced projects, only about 13 percent had binding contracts in hand by late 2025. The UAE’s Masdar has pushed back its production target. Oman has already pressed ahead with seven projects, after two prominent ventures collapsed.

Most of that demand was always going to come from Europe and East Asia, conjured there by public subsidy. That foundation looks less solid than it once did and Europe’s auditors have judged the bloc’s hydrogen targets unrealistic. Germany is overhauling the subsidy schemes meant to pull imported hydrogen across its border.

This is what turns “the next big export” from a fact into a wager. The Gulf is not, after all, betting on its own sun or its own treasuries. Instead, it is betting that the world will build the demand to absorb the supply rising from the desert. And the reasons these states are willing to gamble anyway have as much to do with security as with revenue.

When the Strait closes

Energy in the Gulf has never been a purely economic matter. It has always been a question of passage, of whether the cargo can reach the buyer at all.

The most important passage is the Strait of Hormuz, the narrow mouth of the Persian Gulf where the region’s oil has to breathe before it reaches open water. About a quarter of the world’s seaborne oil moves through it, roughly 20 million barrels a day. So does about a fifth of all traded liquefied natural gas, most of it from Qatar. At its narrowest the channel lies within Iranian and Omani waters, and the alternatives are thin. Only Saudi Arabia and the UAE hold pipelines that can route oil around the Strait. Their spare capacity, an estimated 3.5 to 5.5 million barrels a day, falls far short of the twenty that move through on an ordinary day. For the producers that depend on it, there is no second door.

What that dependence costs became visible in early 2026. Fighting involving Iran, Israel and the United States brought traffic through the Strait to a near standstill. Oil flows fell by almost a third, and crude prices climbed more than 45 percent. The damage did not fall evenly. Kuwait, Qatar and Iraq watched revenues collapse and their economies shrink by as much as 14 percent. Oman, by contrast, sitting outside the Strait on the open Arabian Sea, stood to lose almost nothing.

The coasts Iran can’t reach

Geography was already sorting the region into the exposed and the insulated, and green hydrogen carries that sorting forward. The new plants stand with their backs to the chokepoint, NEOM on Saudi Arabia’s Red Sea coast, Oman’s hubs at Duqm and Salalah on the Arabian Sea, Egypt’s along the Mediterranean and the Red Sea, Morocco’s facing the Atlantic. The Arab world’s wager on hydrogen is also, quietly, a wager on coasts beyond Hormuz’s reach.

For Iran, that geography is a slow problem. Its weight in the region has rested on two things: its standing as a major oil and gas state, and its grip on the waterway its rivals must use. Hydrogen wears at both. The Gulf Arab states are building the new trade, on shores Iran can neither reach nor threaten. Iran itself, sanctioned and starved of investment, has no way into it. None of this happens quickly, and oil will matter for years yet. But the drift runs away from the foundations of Iran’s leverage, not toward them.

Routing exports around Hormuz is no clean escape from chokepoints, only a relocation of them. It favors some producers far more than others. NEOM’s Red Sea outlet runs past the waters where Yemen’s Houthis have attacked global shipping. Qatar, the region’s gas giant, has no coast outside the Gulf at all. What hydrogen offers, then, is less an escape from this geography than a rearrangement of it.

What it means for Washington

The shift reaches Washington too, where for two generations the United States has underwritten the security of Gulf energy. American power kept the oil moving and the Gulf’s producers inside Washington’s orbit. Its military presence deterred Iran and guaranteed every barrel passing through chokepoints like Hormuz. But a trade in molecules shipped from the Red Sea and the Arabian Sea leans on that promise far less. As fossil fuels stop passing through the Navy-guarded channel, the reason to keep its ships there thins and the old logic of American presence slowly erodes.

Washington, meanwhile, has turned back toward fossil fuels and pulled support from the low-carbon technologies the transition depends on. China, its chief rival, has moved the other way, into the commanding position in this new order. The danger, by one reading, is that America finds itself left behind in a transformation its own partners are leading. The Arab world’s largest producers, for their part, are not waiting to learn what the next era holds. They are spending tens of billions to shape it on their own terms. A century ago the wealth came out of the ground by accident of geology. This time the bet is deliberate, and the story is being written, for once, in molecules they chose to make.