With Iran’s blockade of the Strait of Hormuz forcing Gulf oil producers to dramatically curb output, governments across the region are intensifying investment in overseas renewable energy projects, underscoring their growing strategic importance amid the escalating energy crisis.
Now in its third month, the U.S.-Israeli war with Iran has triggered the largest supply disruption in the history of the global oil market according to the International Energy Agency (IEA), adding renewed incentive to the Gulf countries’ plans to diversify their energy mix and economies more broadly.
A flurry of sizeable investments advancing such plans have been announced over the last couple of months.
In April, Abu Dhabi’s renewables champion Masdar signed a binding agreement with France’s TotalEnergies toestablisha $2.2bn 50/50 joint venture that will merge their onshore renewable activities in nine countries across Asia.
In early May, Abu Dhabi sovereign wealth fundMubadala Investment Companytook a significant minority stake in San Francisco-based renewables management platform,Power Factors,whose software is used by 70% of the world’s 50 largest renewable energy producers.
It also invested $325m in Orsted’s Hornsea 3 project offtheeastcoast ofthe U.K.this month. When combined with Hornsea 1 and 2,itwillbecome the world’s largest single offshore wind farmwith a total capacity exceeding 5 Gigawatts (GW).
“A lot of these projects are long-laid plans,” Robin Mills, CEO of Qamar Energy, a Dubai-based energy advisory company, told Fortune.
“I think thereis also an acceleration taking place due to Gulf countries increasingly considering their domestic energy security. Current events are leading to an improved investment landscape for their overseas renewables portfolios due to the desire to be more diversified and strategic.”
In January this year, Masdar’s global renewable energy capacity hit a notable milestone of 65 GW – up from 51 GW in 2025–placing it two-thirds of the way towards its goal of reaching 100 GW capacity by 2030.
“The UAE is keen tomonetizeits oil resources more quickly in anticipation of peak global demand as well as in order to free up larger gas supplies to cater to its ambitious industrial and AI development plans”
Robin Mills, CEO of Qamar Energy
Since its establishment in 2006, the company has invested $45bn across six continents and plans to deploy anadditional$30-35bn in equity, green bonds and project finance this decade.Itwantsto add an average of 10GW of new capacity each year.
The UAE’s decision in April to leave OPECcrystallizeda notable divergence from fellow members on the future role of oil.
The Gulf country is now targeting an increase in its oil production capacity to 5 million barrels per day (bpd) by 2027, up from the 3.4 millionbpd itrecorded in January 2026.
“The UAE is keen tomonetizeits oil resources more quickly in anticipation of peak global demand as well as in order to free up larger gas supplies to cater to its ambitious industrial and AI development plans,” said Mills, noting how gas is often produced in association with oil, and vice versa.
But while the Iran war is strengthening the GulfCooperation Council’smedium to long-term strategic commitment to the energy transition, it is also threatening the planned buildout of domestic renewable projects.
Data published by Norway’s Rystad Energy in mid-May shows that Gulf solar PV imports collapsed in March; the UAE’s imports fell to 160MW from 767MW the previous month,while Saudi Arabia’s dropped from 704MW to 80MW. Oman recorded zero.
This looks set to pose challenges to Omanwhichsigneda major contractinMay for a 24/7 renewable energy project that combines wind, solar and battery storagethat isexpected to provide firm capacity of around 770 MW.
The scheme forms part of a larger 2.7GW hybrid renewable energy development spanning the Mahout and Duqm areas on Oman’s coast, with thecountry targeting 30% of electricity generation from renewables by 2030.
With much of the Gulf’s clean energy supply chain disrupted by the ongoing blockade, freight rates on the Shanghai to Gulf and Red Sea route have hit record highs on the back of a spike in fuel costs and the intense competition to find trucking capacity to transport cargo by road.
The cost to ship a standard 20ft container (TEU) on the Shanghai to Gulf and Red Sea route ballooned from $980 before the outbreak of the war to $4,131 in the week to15May, according to shipping data providerClarksonsResearch.
This surpasses even the Covid-19 pandemic peak of $3,960 per TEU in 2021.
Rystad Energy now estimates a net delay of between three and twelve months across the active renewable energy pipeline in the Middle East.
“The Hormuz disruption means that capital that might have flowed into domestic project finance is being redirected toward more stable deployment environments while supply chain uncertainty persists,” Christopher Gooding, an energy transition analyst at Cornucopia Capital and a research fellow at Gulf Sustain, told Fortune.
“The critical variable is duration. If the Hormuz disruption extends into H2 2026, the three-to-twelve-month delay range skews toward the higher end, and some projects currently in procurement willlikely berestructured or deferred to 2027.”
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