On February 28, 2026, a joint military strike by the United States and Israel against Iran escalated the already volatile situation in the Middle East. The subsequent closure of the Strait of Hormuz disrupted shipping and triggered significant volatility in energy markets, also impacting the photovoltaic (PV) industry chain, a cornerstone of the global energy transition.
The PV industry chain, encompassing upstream raw materials and auxiliary materials, midstream processing, downstream applications, and logistics, faces differentiated impacts from the regional instability through channels like supply chain transmission, cost fluctuations, and demand adjustments.
I. The Rise of Localized PV Production in the Middle East Encounters Uncertainty
In recent years, Gulf nations like Saudi Arabia and the UAE, leveraging abundant energy resources and sovereign capital, have aggressively pursued localized PV manufacturing. Companies such as ACWA Power and Alfanar, in partnership with Chinese technology providers, have initiated projects for polysilicon and module production, with some lines commencing trial production by the end of 2025.
However, if the conflict spreads to the Persian Gulf or the Arabian Peninsula hinterland, it could not only cause factory shutdowns and personnel evacuations but also damage foreign investment confidence, potentially delaying the region's "PV autonomy" progress.
Notably, some newly operational polysilicon producers in the Middle East began trial supply to Chinese and Southeast Asian clients in late January. If the conflict persists, this emerging supply source could face disruption.
II. Logistics Chokepoint Disruption Drives Up Costs and Prolongs Delivery Times
The Strait of Hormuz is not only a vital route for oil tankers but also a critical bridge connecting the Middle East to global markets. The most immediate impact of the Middle East conflict is the disruption of logistics chains and a restructuring of costs.
While Iran is not the primary export destination for Chinese PV modules, countries like Saudi Arabia, the UAE, and Oman, which host significant Chinese PV manufacturing capacity, rely heavily on this waterway for exporting their products and importing equipment.
With the strait closed, shipping costs have surged 30-50%, and vessels rerouting via the Cape of Good Hope add 10-14 days to voyages. This creates immediate delivery pressure for companies with polysilicon and wafer production capacity in Saudi Arabia and Oman, e.g., GCL Tech, TCL Zhonghuan, United Solar Holding, potentially delaying project construction and equipment installation.
According to Mysteel's data, post-Chinese New Year, mainstream average prices for wafers 183N, 210RN, and 210N remained stable at Yuan 1.1, 1.2, and 1.4 per piece, but actual low-end transactions have dipped to Yuan 1.05, 1.15, and 1.35/piece.
While domestic wafer production schedules have increased in March amid the final stages of export rush, shipping disruptions have delayed overseas wafer deliveries, exacerbating the supply-demand imbalance and increasing the risk of high industry inventories.
Although the Middle East crisis hasn't directly impacted domestic wafer production, the resulting rise in global logistics costs and delays in end-user projects have indirectly hampered wafer shipment schedules.
III. Raw Material Supply Disruptions Elevate Auxiliary Material and Module Costs
The PV upstream sector encompasses core raw materials like polysilicon and wafers as well as auxiliary materials like PV glass, silver paste, and electronic specialty gases.
Separately, the core raw materials like polysilicon and wafers are minimally affected, with China accounting for over 85% of global capacity and achieving 100% self-sufficiency. Domestic raw material supply does not depend on the Middle East, with the only impact being a slight increase in electricity costs driven by higher oil prices, which is manageable.
However, the auxiliary materials segment faces a more direct impact. PV glass is most significantly affected by the surge in methanol prices. Iran, as the world's second-largest methanol producer and China's largest supplier, has seen widespread shutdowns of its methanol plants due to the geopolitical crisis. This widens the global methanol supply gap, causing short-term price increases of 15-30%. As methanol accounts for 10-15% of PV glass production costs, this directly pushes up glass prices and indirectly increases module costs.
Additionally, Iran is a major global supplier of neon and krypton gases. Disrupted exports could create short-term supply tightness for these electronic specialty gases, potentially affecting the production rhythm of N-type cells like HJT.
However, diversified alternative sources have been established domestically, making the impact manageable.
Silver paste has experienced certain price fluctuations due to risk aversion sentiment. But this impact can be fully offset thanks to a domestic self-sufficiency rate exceeding 90% and technological progress in reducing silver consumption.
According to Mysteel, since the market returned after the Chinese New Year holiday, the PV module market has generally maintained high price quotations. Leading integrated companies have kept the prices firm, with mainstream TOPCon module's ex-factory prices stable at Yuan 0.87-0.9/watt. Quotations from second and third-tier manufacturers are concentrated in the Yuan 0.83-0.85/watt range.
Source: Mysteel
Moreover, there are rumors of further price hikes circulating on the market, which are supported by two main factors. Firstly, the upcoming cancellation of the VAT export rebate for PV products from April 1, 2026 is prompting overseas clients to accelerate order placement, creating a final window for export rush. Secondly, a slight rebound in silver prices is pushing up cell costs aside polysilicon, adding further cost pressure on modules.
Driven by both policy and cost factors, module prices have strong short-term support. Subsequent trends will depend on the intensity of the export rush and the direction of silver price movements.
IV. Volatile Energy Prices Create a Two-Sided Impact on PV Economics
The Middle East crisis once pushed international oil prices above $100 per barrel, with natural gas prices also jumping. In the short term, higher energy prices will significantly improve the return on investment for PV power plants, strengthening their economic advantage and stimulating concentrated release of overseas market demand.
While specific export data for Chinese PV products in January-February 2026 is not yet available, the Middle East has already become a crucial destination for Chinese PV modules last year. According to customs data, the Middle East accounted for 15% of China's PV module exports in 2025.
Against this backdrop, regions like the Middle East, Europe, and India have revised their 2026-2027 PV installation targets upwards by 30-50%, rapidly transforming PV from an "optional energy source" into a strategic necessity for ensuring energy security.
Demand for residential energy storage and off-grid PV systems has surged in regions with long-lasting power shortages, such as Iraq and Yemen, creating new growth engines.
However, alongside surging demand, shipping disruptions and geopolitical uncertainty significantly increase order fulfillment risks. Although new order volumes are rising, the efficiency of actual project execution and stability are facing severe challenges.
Conclusion
The impact of Middle East geopolitical risks on the global PV industry chain is distinctly structural and phased.
In the short term, rising auxiliary material costs, logistics disruptions, and regional order delays exert certain pressures on the chain, but the overall impact remains manageable and has not shaken China's dominant position in the global PV industry.
Over the medium to long term, the awakening of global energy security awareness triggered by Middle East risks positions PV as a core choice for national energy transitions. Combined with post-conflict reconstruction demand in the region, the PV industry chain may experience renewed demand growth.
Written by Aggie Hu, huchenying@mysteel.com
