Gulf oil producers rush to build pipelines bypassing Iran-controlled Strait of Hormuz

Every day before the war in Iran, roughly 15 million barrels of Persian Gulf oil moved through the Strait of Hormuz—a narrow waterway that hugs Iran's coast and funnels a quarter of the world's traded petroleum to global markets. That chokehold is now prompting a historic reshuffling of energy infrastructure. Gulf oil producers, spooked by Iran's control of the strait and watching prices climb, are pouring billions into pipelines designed to route their oil around the bottleneck entirely, sending it instead to ports on the Red Sea, the Gulf of Oman, and the Mediterranean.

At least seven major pipeline projects are now under construction, in planning stages, or being actively discussed among government officials, oil companies, and energy analysts. The war has functioned as a forcing event—a demonstration that relying so heavily on a single transit point controlled by a hostile power is, as one senior analyst put it, no longer a sensible long-term strategy. Saudi Arabia and the United Arab Emirates are leading the charge, but Iraq, which depends on oil sales for roughly 90 percent of its government revenue, is also scrambling to develop alternatives. The scale is enormous. Goldman Sachs analysts estimate that by the end of 2028, these new projects could move 7.3 million barrels per day around Hormuz—enough to bypass the strait entirely for about 60 percent of the Persian Gulf's prewar export volume of 23 million barrels daily.

Saudi Arabia already has a head start. In the 1980s, during the Iran-Iraq war, the kingdom built an east-west pipeline carrying oil across its desert from a processing facility at Abqaiq to the Red Sea port of Yanbu. That pipeline, combined with the UAE's existing routes to the port of Fujairah on the Gulf of Oman, had spare capacity of between 3.5 and 5.5 million barrels per day before the current war began. Both are now running near full capacity. The UAE is accelerating construction of a new $3 billion, 300-kilometer pipeline to Fujairah that will run parallel to the existing one and add more than 1.2 million barrels daily to the port's throughput. The project, which started before the war, is roughly halfway complete and is expected to finish by mid-2027, though port expansion work may push that timeline further.

Iraq's plans are more ambitious but also more distant. The government is pursuing pipeline projects with U.S. companies to move oil from the Basra terminal—which exported more than 3 million barrels daily before the war—northward to the Turkish Mediterranean port of Ceyhan, with a branch extending to the Syrian port of Baniyas. The U.S. State Department has called Baniyas a critical energy corridor. Iraqi officials are also discussing a separate pipeline to the Jordanian port of Aqaba on the Red Sea, from which oil could be exported via the Suez Canal to Asia. These longer routes will add time and cost to oil shipments, and they point to a fundamental problem: pipelines carrying oil to the Mediterranean send it in the wrong direction for Asian customers who relied on Hormuz exports, forcing a much longer voyage around Africa's southern tip.

The alternative routes are not immune to disruption. The Red Sea has become a contested waterway. Yemen's Iran-backed Houthi rebels attacked two Saudi oil tankers there early this week, demonstrating that the new corridors carry their own vulnerabilities. The rebels have successfully disrupted shipping before at the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden. In May 2019, a Houthi drone strike shut down Saudi Arabia's east-west pipeline entirely. Oil sent through the Suez Canal to reach the Mediterranean faces a different constraint: the canal cannot accommodate the industry's largest tankers, which hold up to 2 million barrels per vessel and are often the most economical way to move oil over long distances. And the pipeline projects do nothing to address disruptions to liquefied natural gas shipments, which account for about one-fifth of global LNG trade and transited Hormuz before the war—much of it from Qatar bound for Asian customers.

Still, the momentum is unmistakable. Gulf producers have concluded that the old arrangement—funneling a quarter of the world's oil through a single strait controlled by a hostile power—is no longer acceptable. The new pipelines represent a bet that the cost and complexity of building alternative infrastructure, even if it is slower and more expensive and still vulnerable to attack, is preferable to the strategic risk of dependence. By the end of next year, these projects could add 3.8 million barrels of daily capacity. By 2028, that figure could reach 7.3 million. The question now is whether the new routes will remain open long enough to deliver on that promise.