Gulf States Accelerate Plans to Reduce Dependence on the Strait of Hormuz

The Strait of Hormuz, through which roughly 20% of global oil consumption normally passes, has become one of the world's most closely watched energy chokepoints. As the U.S.-Iran conflict enters its fifth month, repeated attacks on commercial shipping and new maritime restrictions have significantly reduced vessel traffic, prompting Gulf nations to accelerate investment in alternative export infrastructure.

The long-term objective is clear: build pipelines and ports capable of bypassing a majority of Hormuz-bound oil exports by 2028.

Shipping Through Hormuz Continues to Decline

According to Kpler maritime tracking data:

- On July 13, only 14 vessels transited the Strait of Hormuz.
- Traffic declined roughly 60% compared with 37 vessels recorded on the same day one week earlier.
- Even with U.S. naval escorts, only about 8.5 million barrels moved through the strait that day versus a regional average of approximately 15 million barrels per day.

The sharp decline highlights the growing disruption affecting one of the world's most important energy corridors.

Oil Prices Respond to Rising Geopolitical Risk

The disruption has had an immediate impact on global crude prices.

- Brent crude climbed more than 4% on Monday to approximately $79.50 per barrel.
- Prices accelerated further after President Trump announced a proposed 20% transit fee on cargo passing through Hormuz and reinstated a blockade on Iranian ports.
- By July 14, Brent had surged to approximately $86 per barrel, representing a gain of nearly $9 in a single day.

At current prices, a 20% cargo transit fee would cost roughly $32 million for a fully loaded supertanker, creating a significant additional cost for global energy transportation.

Saudi Arabia Expands Alternative Export Routes

Saudi Arabia already operates the East-West Pipeline (Petroline), extending roughly 750 miles from Abqaiq on the Gulf coast to Yanbu on the Red Sea.

Key figures include:

- Design capacity: approximately 7 million barrels per day
- Typical operating throughput: around 4–5 million barrels per day

Following the outbreak of conflict, Saudi Aramco restored the pipeline to full operational status within eight days, allowing roughly 60% of Saudi Arabia's pre-war oil exports to be redirected through Red Sea terminals instead of Hormuz.

Reports also indicate that Saudi Arabia is evaluating additional expansion of the pipeline to further strengthen export flexibility.

The UAE Is Building Additional Capacity

The United Arab Emirates has also accelerated infrastructure investment.

The existing Abu Dhabi Crude Oil Pipeline (ADCOP) stretches approximately 380 kilometers from Habshan to Fujairah on the Gulf of Oman with capacity of approximately 1.8 million barrels per day.

On May 15, Crown Prince Sheikh Khaled bin Mohamed instructed ADNOC to accelerate development of a second West-East Pipeline, which aims to:

- Double Fujairah export capacity.
- Increase pipeline throughput toward 3.6 million barrels per day.
- Become operational during 2027.

If completed on schedule, the UAE would significantly reduce its dependence on the Strait of Hormuz.

New Port Infrastructure Supports the Strategy

Beyond pipelines, Gulf countries are also investing heavily in logistics infrastructure.

According to the Financial Times, DP World plans to construct:

- A new multipurpose port along the Fujairah coastline.
- An expanded container terminal at the existing Fujairah harbor.

Because Fujairah is located outside the Strait of Hormuz, the project is designed to create a major logistics hub capable of handling both oil exports and general cargo without relying on passage through the chokepoint.

Goldman Sachs Sees Major Structural Change

On July 14, Goldman Sachs analyst Alexandra Paulus estimated that pipeline projects currently under construction could:

- Protect more than 45% of pre-war Persian Gulf export volumes from Hormuz disruption by the end of 2027.
- Increase that figure beyond 60%, or approximately 7.3 million barrels per day, by the end of 2028.

Goldman also noted that large pipeline projects in the Middle East have historically required a median construction period of approximately 2.5 years, broadly matching current regional development timelines.

Important Risks Still Remain

Despite these investments, several structural challenges continue.

Even after all announced infrastructure projects are completed:

- Approximately 7–9 million barrels per day of oil exports would still depend on Hormuz.
- Exports from Kuwait, Qatar, Bahrain, and portions of Iraq and Saudi Arabia cannot be fully redirected.

Additional risks also remain:

- Fujairah remains within range of Iranian missile and drone capabilities.
- Saudi Arabia's Red Sea export route faces potential disruption from Houthi attacks.
- Goldman Sachs also raised its long-term oil price assumption by $9 per barrel to $76, while noting that expanded pipeline capacity could gradually reduce the geopolitical risk premium currently supporting crude prices.

Market Outlook

The outlook remains divided between short-term volatility and long-term structural change.

In the near term, additional military escalation—including attacks on tankers, renewed blockades, or direct strikes against energy infrastructure—could continue pushing Brent and WTI higher, making $100 oil increasingly plausible if disruptions worsen.

According to The Economist, Brent rose approximately 10% to $83 on July 13 alone, yet prices still remain below the highs reached earlier in the year.

Over the longer term, expanding pipeline networks and alternative export terminals could fundamentally reduce dependence on the Strait of Hormuz and reshape global energy logistics.

Key Takeaway

Gulf states are no longer relying solely on diplomacy to manage Hormuz-related risks. Through large-scale investments in pipelines, export terminals, and logistics infrastructure, the region is building a more diversified energy network capable of bypassing one of the world's most vulnerable shipping routes.

If current projects are completed as planned, more than 60% of Gulf oil exports could avoid the Strait of Hormuz by 2028, reducing long-term geopolitical dependence while reshaping global oil transportation for years to come.

#UAE
#Pipelines
#Geopolitics
#SaudiArabia
#StraitProofOilInfrastructure
@Gate_Square