Gulf states race to reroute oil as chokepoints falter

The 2026 Hormuz crisis served as a watershed moment, sharply refocusing global energy policy from primarily climate and sustainability concerns to the urgent realities of energy security and supply chain vulnerabilities. This shift brought renewed scrutiny to critical maritime chokepoints like the Strait of Hormuz and the Strait of Malacca, where debates arose over potential tolls and the implications for free navigation under the UN charter, highlighting the geopolitical complexities surrounding these vital arteries of global trade.

Asian economies bore the brunt of the crisis’s immediate fallout, with 10 to 30 percent of their trade disrupted due to soaring Gulf energy costs, prompting policymakers to reconsider renewables through a pragmatic energy security lens rather than purely environmental motives. Simultaneously, the crisis reignited contentious discussions about nuclear energy’s role, signaling a potential pivot in long-term strategies as nations grappled with the fragility of existing supply chains.

Despite hopes for a ceasefire in the Hormuz region, industry experts warned that full normalization of oil and LNG supplies could take one to two years, given the extensive repairs and supply chain restoration required. This protracted recovery timeline forced companies to brace for sustained elevated energy prices, a scenario underscored by John Mearsheimer’s stark warning that oil prices might surge from the $90 range to between $110 and $120 amid ongoing threats like Houthi activity in the Bab el-Mandeb Strait.

The crisis starkly exposed the global economy’s razor-thin margin for absorbing energy shocks, revealing that beyond geopolitics, factors such as insurance, shipping lane security, and crude inventories are critical buffers. This fragile macroeconomic backdrop heightened the urgency among global actors to address the vulnerabilities posed by maritime chokepoints, underscoring that energy security is as much about managing logistical and financial risks as it is about political stability.

In response to escalating geopolitical tensions and repeated disruptions at critical maritime chokepoints like the Strait of Hormuz and Bab el-Mandeb, Gulf countries have embarked on an ambitious infrastructure expansion to diversify export routes. The UAE's accelerated completion of the West-East and Habshan–Fujairah pipelines, collectively aiming to bypass the Strait of Hormuz by mid-2027, exemplifies this strategic pivot, enhancing export flexibility by potentially rerouting over 1.2 million barrels per day through Fujairah. Similarly, Saudi Arabia has revitalized its decades-old East-West pipeline to Yanbu, increasing its utilization from near dormancy to a vital artery despite its vulnerability to Houthi attacks, while Iraq pursues new pipelines to Mediterranean ports with U.S. partners to further reduce chokepoint dependence. These efforts collectively signal a regional shift toward embedding redundancy and resilience into energy export infrastructure amid a landscape where traditional maritime routes are increasingly fraught with risk.

While these alternative pipelines and port expansions have significantly increased bypass capacity—Saudi Arabia’s East-West pipeline and UAE’s Abu Dhabi-Fujairah route together offering several million barrels per day—the gap between this capacity and the volume historically transiting the Strait of Hormuz remains substantial. The UAE’s Habshan–Fujairah pipeline, for instance, maxes out at about 1.8 million barrels per day, roughly half of its pre-conflict export levels, underscoring the urgent need for further infrastructure investments to prevent cascading disruptions in global energy security. Moreover, the high costs and underutilization of such pipelines during peacetime pose financing challenges, necessitating consumer commitments and guarantees to ensure economic viability, as highlighted by recent Japanese government analyses.

Beyond physical infrastructure, Gulf states are innovating financial mechanisms to sustain trade flows amid persistent security threats. Saudi Arabia’s exploration of a state-backed war and political risk insurance pool, potentially covering up to SAR 700 million per insured event, aims to mitigate insurance uncertainties for shipowners navigating vulnerable maritime routes affected by escalating Houthi attacks. By broadening coverage to encompass war, terrorism, and political violence under one umbrella, this initiative seeks to maintain export continuity through ports like Yanbu and reduce insurance costs that could otherwise deter maritime traffic, reflecting a comprehensive approach to managing the complex risk environment surrounding key chokepoints.

The UAE is strategically reshaping its energy export infrastructure to reduce reliance on the Strait of Hormuz, exemplified by the accelerated completion of the West-East Pipeline by 2027 and the expansion of the Habshan–Fujairah pipeline. This infrastructure pivot, coupled with the UAE's 2024 exit from OPEC, enables increased oil and gas production free from quota constraints, supporting ambitions for gas self-sufficiency by 2030 and diversification of LNG exports through new facilities outside the chokepoint. Despite hydrocarbons now constituting roughly a quarter of the UAE's GDP, oil revenues remain crucial for funding these infrastructure projects and broader economic diversification initiatives, including rerouting fertilizer exports and expanding chemical production clusters.

Japan is aggressively pursuing a comprehensive energy security strategy that prioritizes bypassing vulnerable maritime chokepoints like the Strait of Hormuz through expanded financial support for overseas pipeline projects. By empowering institutions such as the Japan Bank for International Cooperation and JOGMEC with multi-billion-dollar underwriting capabilities, Japan aims to develop and expand critical infrastructure like Saudi Arabia’s East-West pipeline and the UAE’s Habshan-Fujairah pipeline, backed by subsidized sovereign loans and risk mitigation mechanisms. This approach not only stabilizes Japan’s energy procurement costs against geopolitical price shocks but also reflects a broader shift towards strategic autonomy from reliance on U.S. naval protection, while simultaneously planning to expand domestic nuclear power capacity to 12-14 reactors by the 2050s to meet rising demands from AI data centers and renewable energy research.

Across the Gulf region, a renewed focus on pipeline infrastructure investment signals a strategic shift to diversify energy export routes and enhance supply chain resilience amid escalating geopolitical risks. While many existing bypass pipelines are decades old, recent investments—primarily from the UAE—highlight a resurgence in infrastructure development designed to reduce chokepoint dependency. However, these projects require firm consumer commitments and guaranteed offtake to justify their high costs, as underutilized pipelines like Saudi Arabia’s East-West route struggle with maintenance expenses. This trend toward diversification extends beyond the Middle East, with initiatives such as Canada’s west coast pipeline reflecting a global move to increase optionality in energy transport amid a more fractious geopolitical landscape.

By 2026, the rapid retreat of Arctic ice has enabled China to plan weekly voyages through the Northwest Passage, slashing transit times between China and Europe from 40 to 20 days and signaling a profound shift in global shipping dynamics. This emerging Arctic corridor challenges the primacy of traditional maritime chokepoints like the Suez and Panama Canals, which were constructed for a bygone era and now face obsolescence amid evolving trade patterns and geopolitical risks. As one analyst observed, if designing an optimal route today, the Strait of Hormuz would be avoided due to its geopolitical volatility, underscoring the diminishing strategic relevance of these conventional passages.

Simultaneously, overland and hybrid trade corridors such as the International North South Transport Corridor are reshaping Eurasian geopolitics by connecting northern Europe to the Arabian Sea through Russia, Azerbaijan, and Iran, effectively bypassing the Strait of Hormuz and the Suez Canal. This corridor, running from St. Petersburg to Bandar Abbas and Chabahar, exemplifies how infrastructure investments are enabling nations to sidestep vulnerable maritime chokepoints, thereby reducing exposure to regional tensions and environmental challenges like the Panama Canal’s declining water levels. These developments reflect a broader Eurasian renaissance in trade routes that had been dormant since the early 1990s, reversing decades of isolation caused by historical conflicts and Soviet-era disruptions.

While alternative routes such as pipelines bypassing the Strait of Hormuz have been accelerated due to geopolitical tensions, they remain hampered by significant operational and capacity constraints. For instance, Saudi Arabia’s 1,200-kilometer Petroline pipeline, originally designed to handle up to 7 million barrels per day after upgrades, currently operates at only a fraction of the nearly 20 million barrels daily that once flowed through Hormuz, with sustainable high-volume throughput untested. Moreover, port bottlenecks at Yanbu limit terminal loading to around 4.3 to 4.5 million barrels per day, creating a critical chokepoint that undermines the pipeline’s full potential and exposes the system to vulnerabilities beyond physical infrastructure, including insurance risks and security threats such as Houthi drone attacks.

The complexity of monitoring and verifying oil flows through alternative routes further complicates diversification efforts, as demonstrated by stark discrepancies in shipping data at Yanbu, where estimates for weekly loadings vary nearly threefold between sources like Vortexa, Kpler, and AXSMarine. Similar ambiguities plague the UAE’s Habshan-Fujairah pipeline, which, despite a rated capacity of 1.5 to 1.8 million barrels per day, reported loadings exceeding this limit due to intricate ship-to-ship transfers and shuttle tanker operations that partially circumvent the Strait of Hormuz. These operational nuances highlight that current infrastructure expansions provide contingency rather than a foolproof solution, leaving global energy transit vulnerable to disruptions and inefficiencies.

Beyond physical infrastructure, the strategic value of maintaining oil storage facilities outside critical chokepoints like the Strait of Hormuz has become increasingly apparent, as disruptions not only elevate LNG shipping costs but also threaten broader energy security. Countries such as Türkiye are responding by diversifying their energy strategies—expanding renewable capacity and leveraging AI in oil and gas exploration—to reduce dependence on vulnerable transit routes. This shift underscores the limitations of current diversification efforts, which, while necessary, serve primarily as stopgap measures rather than comprehensive risk elimination in a geopolitically volatile region.

Saudi Arabia’s planned expansion of the East-West Crude Oil Pipeline, known as Petroline, by up to 2 million barrels per day exemplifies the Kingdom’s strategic push for greater energy export capacity and resilience. This move, highlighted by Aramco CEO Amin H. Nasser as a cornerstone of business continuity amid regional disruptions, reflects a multi-decade vision to diversify export routes away from the vulnerable Strait of Hormuz, thereby enhancing strategic autonomy.

The Petroline expansion aligns closely with Saudi Arabia’s Vision 2030, aiming to transform the Kingdom into a global logistics hub by integrating pipeline infrastructure with ports like Yanbu and industrial zones. This comprehensive approach not only strengthens supply chain resilience but also positions Saudi Arabia to better withstand geopolitical uncertainties while supporting broader economic diversification goals.

Energy experts emphasize that the pipeline’s growth is less about sheer export volume and more about strategic flexibility, providing Saudi Arabia with an alternative to the Strait of Hormuz and thereby reducing—but not eliminating—geopolitical risks. As economist Carole Nakhle notes, while the expansion bolsters market confidence during tensions, it should be viewed as a risk mitigation tool rather than a panacea for supply disruptions.