Middle East conflict accelerates shift towards local renewable energy manufacturing amidst supply chain disruptions

The ongoing conflict in the Middle East is already having a noticeable impact on the deployment of renewable energy initiatives across the region, even as it underscores the importance of cleaner energy sources for the long haul. According to an analysis from Rystad Energy, the immediate consequence appears to be a delay, somewhere in the range of three to twelve months, in active project pipelines. Interestingly enough, the biggest disruptions are expected in markets closest to the conflict zones and around the Strait of Hormuz.

For the Gulf countries, this tension isn’t just about oil and gas. It’s also about whether solar panels, batteries, and the essential materials needed to produce them can still move smoothly through busy shipping routes and strained supply chains. Rystad notes that the region’s renewable markets are now being shaped by a combination of conflict risk, higher freight charges, rising input costs, and the potential for investment capital to shift towards safer, lower-risk regions.

This situation matters a lot for nations like the UAE, Saudi Arabia, and Oman. Here, large-scale solar projects rely heavily on imported equipment and swift project financing. Rystad expects a short-term slowdown in these markets, but then a rebound as governments and developers get back to their transition plans in the medium term. On the other hand, countries like Qatar, Kuwait, Iraq, Bahrain, and Jordan are forecasted to experience more moderate delays. Iran, Israel, Syria, Lebanon, and Yemen, however, remain the most vulnerable, with setbacks likely to be prolonged.

Trade data already hints at some strain. Rystad found that solar PV imports in March 2026 dropped well below the monthly averages seen in 2025 across Gulf states. For instance, the UAE’s imports fell to 160 MW from an average of 767 MW, Saudi Arabia’s imports declined to 80 MW from 704 MW, and Oman recorded no imports at all. Conversely, Türkiye and Israel, less reliant on routes vulnerable to Hormuz disruptions, continue to import significant quantities.

The disruption isn’t just limited to panels. S&P Global reports that the conflict is impacting supply chains for materials like aluminium, copper, helium, and sulfuric acid, all of which are crucial for renewable tech and battery storage. With shipping through the Strait of Hormuz under increasing pressure, logistics costs have gone up, making delivery timelines much harder to manage.

Freight costs are also creating hurdles for project economics. Rystad highlighted a rise in shipping rates between Asia and the Mediterranean from late February through early April. Simultaneously, China’s decision to eliminate its VAT export rebate from April 1 increased module costs, and rising silver prices have driven up cell manufacturing expenses, too. For developers working with tight margins, these changes are prompting contract reviews, negotiations, and sometimes a reevaluation of where to invest.

This financial strain hits especially hard in the Gulf, where competitive bidding often results in some of the world’s lowest solar tariffs. Even small increases in capital costs or logistics risks can eat into profit margins. Rystad warns that premiums related to war are now being incorporated into project finance and EPC (engineering, procurement, construction) costs. This trend could first impact new project bids and, over time, put pressure on projects already having reached financial close.

Kuwait might find itself particularly vulnerable. The country is gearing up for its first major solar tender, offering around 1.6 GW, which again exposes it to risks of re-pricing and delays. The same pattern applies across the region: while the technology itself remains viable, the assumptions underpinning the economics are becoming less stable.

On the flip side, the overall argument for renewables has arguably gotten stronger. For oil and gas exporters like the UAE, Saudi Arabia, Qatar, Kuwait, and Iraq, each new megawatt of domestic solar or wind capacity helps conserve hydrocarbons for exports. With Brent crude prices over $90 a barrel and LNG at high levels, burning domestic gas for electricity is becoming increasingly costly in terms of opportunity, the more they generate at home, the less hydrocarbons they need to export, which makes strategic sense.

This logic isn’t just confined to the Middle East anymore. The United Nations Office at Geneva recently pointed out that the conflict has exposed how dependent the global economy is on fossil fuels passing through conflict-prone corridors. They’ve called for accelerating the shift to renewables, emphasizing resilience and climate commitments. Researchers at MIT have gone even further, warning that this energy shock is unusually broad, having disrupted dozens of facilities across the Middle East and triggering ripple effects throughout the global energy system.

Yet, here’s the irony, while the conflict emphasizes the importance of transitioning to clean energy, it also complicates the process. The Renewable Energy Institute points out that rising energy prices and inflation can weaken project financing, even as the need for energy independence becomes more urgent. PV Magazine echoes this concern, noting that logistics issues could slow shipments into the region and drive up prices further. Meanwhile, Wood Mackenzie states that ongoing conflict is delaying efforts to diversify solar supply chains, reversing progress made in reducing costs and sourcing risks.

One area where the Middle East might come out stronger is in local manufacturing of solar modules. Rystad predicts capacity there will grow sharply, from 4.7 GW in 2025 to an impressive 35.8 GW by 2030. This upgrade would cut reliance on imports and shield some parts of the region from future shipping shocks. Turkey is already nearing self-sufficiency in module manufacturing, with domestic capacity expected to stabilize at 22.2 GW from 2026 onward.

For the UAE and its neighbors, the overarching lesson isn’t about abandoning their transition plans entirely, but rather about making them more resilient. Delays, increased costs, and reworked contracts are inevitable, but the strategic advantages of local clean energy sources, more resilient grids, and diversified manufacturing are now more apparent than ever. Yes, the short-term disruption will be frustrating, but it’s also shedding light on why the Gulf’s energy transition shouldn’t be seen as optional, it’s become a strategic necessity.