As tensions continue to rise in the Middle East, Iran’s blockade of the Strait of Hormuz has significantly impacted Gulf oil production. This disruption is prompting Gulf states to ramp up investments in renewable energy projects abroad, aiming to diversify their energy sources amid escalating global energy challenges.
Iran Conflict Disrupts Gulf Oil and Boosts Renewables Investment
The ongoing conflict involving the U.S. and Israel against Iran, now entering its third month, is creating the largest supply disruption in global oil history, according to the International Energy Agency (IEA). This situation accelerates the Gulf nations’ initiatives to transition towards renewable energy.
Strategic Investments in Renewables
In recent months, Gulf countries have made significant advancements in renewable energy investments. Notable examples include:
- Masdar and TotalEnergies: In April, Abu Dhabi-based Masdar partnered with France’s TotalEnergies to form a $2.2 billion joint venture focused on renewable energy activities across nine Asian countries.
- Mubadala’s Investments: The Abu Dhabi sovereign wealth fund, Mubadala, acquired a minority stake in Power Factors in May, a firm that provides software for around 70% of the world’s largest renewable energy producers. Mubadala also invested $325 million in Ørsted’s Hornsea 3 project, which, along with Hornsea 1 and 2, will be the world’s largest offshore wind farm.
Robin Mills, CEO of Qamar Energy, notes that although many of these projects have been in planning for years, the current geopolitical climate is accelerating their implementation. Increased focus on energy security is leading to a more favorable investment landscape for Gulf nations.
Renewable Capacity Goals and Challenges
In January 2023, Masdar achieved a significant milestone, raising its global renewable energy capacity to 65 GW, a notable increase from 51 GW in 2025. The company’s goal is to reach 100 GW by 2030. Masdar has invested $45 billion since its inception in 2006 and forecasts an additional $30-35 billion in the next decade.
Amid these efforts, the UAE has opted to leave OPEC, signaling a shift in oil production strategies. The UAE aims to enhance its oil capacity from 3.4 million barrels per day (bpd) recorded in January 2023 to 5 million bpd by 2027.
Transition Disruptions Due to Conflict
While the geopolitical landscape is pushing Gulf countries toward renewable energy, the ongoing conflict is hindering the development of domestic renewable projects. Recent data from Rystad Energy reveals a dramatic decline in solar panel imports across the region:
- The UAE’s solar imports fell from 767 MW to 160 MW in March.
- Saudi Arabia’s imports dropped significantly from 704 MW to 80 MW, while Oman reported no solar imports.
Oman is proceeding with its plans for a major 24/7 renewable energy project involving wind, solar, and battery storage, targeting 30% of its electricity generation from renewable sources by 2030.
Logistical Challenges and Rising Costs
The ongoing blockade is also raising logistical costs for renewable projects. Freight rates from Shanghai to the Gulf region and the Red Sea have hit record highs, climbing from $980 before the conflict to $4,131 by mid-May. This is the highest rate recorded, even surpassing 2021’s pandemic peaks.
Rystad Energy anticipates that this logistical turmoil may cause delays ranging from three to twelve months for ongoing renewable projects in the Middle East. If the blockade continues into the latter half of 2026, the delays could worsen, affecting many projects currently in development.
Analysts warn that the current uncertainty in the energy supply chain may redirect investment away from domestic projects, as Gulf states seek more stable environments for renewable energy deployment.
