Blue Versus Green Hydrogen Economics After the Hormuz-Driven Ammonia Trade Disruption

The 2026 disruption to shipping through the Strait of Hormuz has changed the way buyers evaluate hydrogen and ammonia supply. The crisis exposed how heavily global fertilizer and chemical markets depend on Gulf production and maritime routes. It also strengthened the strategic case for low-carbon hydrogen, but it has not eliminated the economic advantage of conventional and blue hydrogen in many markets.

The key question is no longer simply whether green hydrogen can eventually become cheaper than fossil-based hydrogen. It is whether energy security, supply diversification and delivered ammonia costs can justify paying a premium for lower-carbon production.

Hormuz Exposed the Vulnerability of Ammonia Supply

The Middle East is a major producer and exporter of hydrogen-based products. The IEA estimates that the region accounts for around 11% of global ammonia production and more than one-quarter of international ammonia trade. Approximately 70% of Middle Eastern ammonia exports pass through the Strait of Hormuz.

The disruption therefore affected more than shipping schedules. It created shortages and price volatility across fertilizer markets. The IEA reported that global urea prices doubled between January and May 2026, as supply disruptions, higher natural-gas prices and export restrictions tightened the market.

For ammonia buyers, this demonstrated that the lowest-cost producer on an FOB basis is not necessarily the lowest-cost or safest supplier once freight, insurance, routing and geopolitical risk are included.

Blue Hydrogen Retains a Cost Advantage

Blue hydrogen is produced primarily from natural gas through steam methane reforming or autothermal reforming, combined with carbon capture. Its economics therefore remain closely linked to natural-gas prices.

In regions with abundant and inexpensive gas, blue hydrogen can remain significantly cheaper than green hydrogen. This is particularly relevant in the United States and parts of the Middle East, where gas infrastructure, hydrogen production facilities and carbon-storage opportunities can support large-scale projects.

The economics become less straightforward when delivered ammonia is considered. A blue-ammonia producer may have a low production cost but still face higher freight, insurance and geopolitical costs when its product depends on vulnerable export routes.

Green Hydrogen Gains a Security Premium

Green hydrogen has a different cost structure. Instead of natural gas, its principal energy input is renewable electricity. This means production can potentially be located in regions with abundant solar or wind resources and does not require dependence on gas imports or Gulf ammonia supply.

The Hormuz disruption has therefore strengthened the strategic argument for green ammonia. Analysts note that the crisis has increased interest in renewable hydrogen as a way to diversify fertilizer supply, particularly in import-dependent markets.

However, this does not automatically make green ammonia cheaper.

Green ammonia can still be around twice as expensive as conventional grey ammonia in some markets, meaning the immediate economic advantage remains with fossil-based production.

The business case for green production therefore increasingly depends on the value assigned to resilience, emissions reduction and supply diversification.

Delivered Cost Matters More Than Production Cost

The Hormuz disruption highlights why hydrogen and ammonia economics should be assessed on a delivered-cost basis.

A buyer evaluating two suppliers should consider:

Delivered cost = production cost + conversion cost + freight + insurance + storage + financing + geopolitical risk

Under normal market conditions, production cost may dominate the calculation. During a major shipping disruption, however, logistics and risk premiums can become much more important.

For example, ammonia prices in the Middle East jumped during the early disruption, with S&P Global reporting a rise to approximately $505 per tonne FOB Middle East on March 4, while several ammonia vessels were stranded around the Strait.

This demonstrates how quickly a theoretically low-cost supply source can become commercially unattractive when physical access is constrained.

Blue Hydrogen Is Not Immune to Geopolitical Risk

Blue hydrogen is sometimes presented as a more commercially mature alternative to green hydrogen. That is true from a technology and feedstock perspective, but it does not eliminate supply-chain exposure.

Blue hydrogen projects located near natural-gas resources and domestic industrial consumers can have strong resilience. Export-oriented projects are more exposed if their ammonia output must pass through the same maritime chokepoints that created the original disruption.

This distinction could influence future project design. Developers may increasingly favour domestic or regional offtake and alternative ports rather than building projects solely around long-distance ammonia exports.

Green Ammonia Can Reduce Feedstock Dependence

The strongest strategic argument for green hydrogen after Hormuz may therefore be its ability to diversify the ammonia supply chain.

Renewable hydrogen can be produced wherever low-cost renewable electricity is available. When combined with nitrogen, it can produce ammonia without natural-gas feedstock. This creates potential production hubs in regions such as North Africa, Australia, Latin America and parts of South Asia.

For fertilizer-importing countries, this could reduce dependence on concentrated Gulf supply.

The Hormuz crisis has already demonstrated the importance of this diversification. Carnegie analysis notes that Morocco's dependence on imported Gulf ammonia and sulfur became particularly exposed during the disruption, accelerating interest in domestic green-ammonia production even though its planned projects are not yet operational.

The Economics Depend on the Buyer

Different buyers will reach different conclusions.

For a large fertilizer producer with access to cheap natural gas and carbon-storage infrastructure, blue ammonia may remain the more attractive near-term option.

For an importer exposed to Gulf shipping disruptions, a somewhat more expensive green-ammonia contract from a geographically diversified supplier may offer greater value.

For shipping companies, the calculation is different again. Green ammonia could eventually become a marine fuel, but adoption requires new vessels, engines, bunkering infrastructure and regulatory support.

The result is a market where the lowest nominal production cost does not necessarily determine the winning supply route.

What Hormuz Changes for Project Developers

The disruption could influence future hydrogen project development in three important ways.

First, location becomes more strategic. Projects with access to multiple export routes or domestic customers may become more attractive than projects dependent on a single maritime corridor.

Second, offtake becomes more valuable. Long-term contracts with fertilizer producers, chemical companies or shipping operators can provide the revenue certainty needed to finance higher-cost low-carbon projects.

Third, resilience becomes part of procurement economics. Buyers may increasingly evaluate suppliers according to route diversification, inventory availability, alternative ports and geopolitical exposure rather than price alone.

S&P Global has reported that shipping bottlenecks and uncertainty continue to affect Middle Eastern chemical trade, with market participants expecting trade economics to remain changed even as routes reopen.

The New Competitive Equation

The post-Hormuz market can therefore be viewed through three competing cost structures:

The table shows why neither technology has won outright. Blue hydrogen currently competes on cost, while green hydrogen increasingly competes on resilience, emissions and diversification.

Outlook

The Hormuz disruption has not suddenly made green hydrogen economically cheaper than blue hydrogen. What it has changed is the value of supply security.

The crisis demonstrated that ammonia supply chains can be disrupted by a single geographic chokepoint and that the resulting costs can spread rapidly through fertilizer, chemical and food markets. The IEA therefore sees the crisis as reinforcing the long-term energy-security case for low-emissions hydrogen, even though such alternatives remain significantly more expensive than conventional production in most markets.

For the next phase of the hydrogen market, the winning projects may not simply be those with the lowest hydrogen production cost. They will be projects that combine competitive energy, secure offtake, diversified logistics and credible protection against geopolitical disruption.

In that environment, blue hydrogen is likely to remain an important low-carbon supply option, while green hydrogen gains strategic value as a tool for reducing dependence on concentrated fossil-fuel and ammonia supply chains.