The Iran war has also come just as the steel industry\u2019s critical progress towards decarbonisation was seen to be slowing<\/a>. In recent years, as early decarbonisation leaders in Europe revised and delayed transition plans, the Gulf region had emerged as a prospective hub<\/a> for lower-carbon iron and steel. This attracted international investments and large-scale projects, several of which are already under construction, or awaiting final investment decisions.<\/p>\n\n\n\n Dialogue Earth spoke with analysts to examine the effects the Iran war has already had and what impact the conflict might bring to global momentum towards greener steelmaking.<\/p>\n\n\n\n \u201cThe Iran war has turned geopolitics from a background risk into a core bankability variable for green iron and steel projects\u201d in and around the Persian Gulf, said Fatin Durukan, a research fellow at the Carboun Institute, a climate change think-tank focused on the Middle East and North Africa. \u201cInvestors are asking not only whether the region can produce low-carbon iron cheaply, but whether it can do so through secure, insured and certifiable corridors,\u201d he added.<\/p>\n\n\n\n The Gulf region is a key hub for direct reduced iron (DRI) production, an alternative to coal-based iron production in blast furnaces. This process usually uses gas but can also be fed by green hydrogen<\/a>, widely seen as a promising path towards low-carbon steel production. Prior to the war, Iran, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates and Oman had nearly 73 million tonnes per year in operating DRI capacity between them, equivalent to more than 43% of global capacity, according to March 2026 data from Global Energy Monitor\u2019s Global Iron and Steel Tracker<\/a>.<\/p>\n\n\n\n Production in the Gulf has typically used fossil fuels, but the region has strong renewable energy potential, with cheap gas available while green hydrogen production ramps up. It also has experience with DRI technology, existing iron supply chains, port-based industrial clusters and a strategic location for exports. These advantages have helped attract at least USD 10 billion in investment across half a dozen<\/a> \u201cgreen iron\u201d projects in Oman, the United Arab Emirates and Saudi Arabia. These projects use renewable energy to produce DRI that can be fed directly into steel furnaces, or transported in a form known as hot briquetted iron (HBI).<\/p>\n\n\n\n But iron and steel production has come under direct attack<\/a> during the war. Strikes on Iranian plants in Isfahan<\/a>, Sefiddasht<\/a>, and Ahvaz<\/a>, as well as a plant in Bahrain<\/a>, have damaged or destroyed more than 10% of global DRI capacity. While none of the targeted plants had low-carbon projects, the war could still have major impacts on prospects for decarbonising the industry.<\/p>\n\n\n\n Durukan noted the tangible impacts of these considerations on several large-scale green iron and steel investments in the region. Among these, he pointed to industry reports that Meranti Green Steel has delayed the final investment decision for its planned 2.5 million tonne per year hydrogen-capable DRI plant<\/a> in Duqm, Oman until the third quarter of 2026. This is despite having already secured<\/a> full offtake coverage for the plant\u2019s output. Meranti did not respond to Dialogue Earth\u2019s request for comment.<\/p>\n\n\n\n Durukan added: \u201cFor projects still at the feasibility, pre-construction, or memorandum of understanding (MoU) stage, the effect may be stronger.\u201d Such projects could include a 5 million tonne per year DRI plant<\/a>, also in Duqm, announced by Mitsui and Kobe Steel and originally planned to start production in 2027, and a 5 million tonne per year DRI project<\/a> in Ras Al Khair, Saudi Arabia.<\/p>\n\n\n\n Optimism in the potential for green iron and steel in the region led to a slew of announcements between 2022 and 2025. \u201cBut the war has changed the standard of credibility,\u201d said Durukan, adding \u201cit is no longer enough to announce a hydrogen-ready facility or sign an MoU.\u201d Now, projects will need \u201cbankable offtake, access to DR-grade iron ore, credible emissions accounting, port and shipping resilience, insurance availability and public sector risk-sharing mechanisms,\u201d to demonstrate they can survive geopolitical stress.<\/p>\n\n\n\n The Gulf region\u2019s position as a key supplier of oil and gas left some nations more exposed to the shock of war than others, while knock-on effects on other sectors\u2019 costs and inputs have also hinged on their existing dependencies.<\/p>\n\n\n\n Countries in South and Southeast Asia have felt<\/a> some of the most severe energy shocks, given their reliance on imported oil and gas from the Gulf. Steel mills in Southeast Asia have faced energy shortages, with SteelOrbis reporting<\/a> in May that the Philippines\u2019 SteelAsia was considering a delay to the expansion of its lower-carbon electric arc furnace business as a result.<\/p>\n\n\n\n India did experience a disruption to gas supplies, but as over 80%<\/a> of the country\u2019s ironmaking is coal-based, this was only felt directly<\/a> by its few gas-reliant players. These include smaller producers in regions such as Gujarat and Punjab, as well as by some large players including JSW and AMNS. The overall effects of the war on the sector have been \u201cmainly indirect\u201d, Parth Kumar, industry programme manager at the New Delhi-based Centre for Science and Environment, told Dialogue Earth. He pointed to higher freight and shipping insurance costs, alongside India\u2019s dependence on imports for nearly 90% of its coking coal supply.<\/p>\n\n\n\n China, meanwhile, experienced some disruption<\/a> to its steel exports during the early days of the conflict, given that roughly a sixth of its shipments were bound for the Middle East following rapid trade growth in 2025. But China has been widely successful in weathering<\/a> the conflict\u2019s shocks, benefitting from decades of electrification and energy security planning, including its five-year plans for energy<\/a>. Its steel industry inputs are also either domestic or arrive largely from Australia and Brazil. As such, recently launched initiatives that could aid steel sector decarbonisation, including a green hydrogen pilot programme<\/a> and updates to its capacity replacement policy<\/a>, have been insulated from energy shocks, even if their conception was not driven by war, analysts told Dialogue Earth.<\/p>\n\n\n\n In the Indian steel sector, this energy shock has also brought renewed attention to the use of coal gasification. In April, Jindal Steel announced it had confronted<\/a> fuel shortages by deploying coal syngas in some of its finishing processes. This expands its existing usage beyond DRI, for which it has been deployed at its plant in Angul, Odisha, since 2020.<\/p>\n\n\n\n The processing of coal into synthetic gas has received increasing focus<\/a> from Indian policymakers since 2020. They aim to harness India\u2019s vast coal reserves for a range of industrial uses and lessen import dependence, targeting 100 million tonnes of output by 2030. It has been pitched<\/a> by some in the sector as a \u201ctransitional industrial strategy\u201d and \u201cbridge\u201d to lower-carbon technologies in the DRI process. But studies<\/a>, and the government\u2019s own Green Steel Roadmap<\/a>, have indicated that coal syngas-based DRI produces a similar or potentially even greater level of lifecycle emissions than the current prevailing technologies in India: burning coal directly for DRI or in a blast furnace.<\/p>\n\n\n\n Kumar emphasised that coal gasification has been a longer-term ambition but described \u201ca further deepening of the shift in mindset\u201d towards energy security among decision-makers since the recent energy shocks. He points to the USD 3.9 billion<\/a> government support scheme for developing the fuel, announced in May: \u201cThe push has been there, and this was probably seen as an opportune time [to advance this].\u201d<\/p>\n\n\n\n On the potential impact on Indian steel decarbonisation, Kumar said: \u201cThese policies might make India energy-secure, but they might also push investments from a lot of the other schemes [for steel decarbonisation]. What about green hydrogen then? Double the money has been allocated to coal gasification. What kind of message are we giving to the industry at this point? Probably that it\u2019s okay to do both.\u201d<\/p>\n\n\n\n India\u2019s Green Hydrogen Mission<\/a>, launched in 2023, laid out USD 2.4 billion in investment to establish 5 million tonnes of annual production capacity by 2030. It is currently off-target<\/a>.<\/p>\n\n\n\n This year, the government has also announced<\/a> over USD 2 billion in support for carbon capture, utilisation and storage (CCUS). Both Jindal Steel<\/a> and the steel ministry\u2019s roadmap<\/a> have argued that CCUS would be necessary to mitigate emissions from coal syngas-based DRI.<\/p>\n\n\n\nWar impacting Gulf industry<\/h2>\n\n\n\n
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<\/div>Wider steel sector feels ripples<\/h2>\n\n\n\n
A coal gasification drive in India<\/h2>\n\n\n\n
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