Gulf Oil Giants Spend Billions to Bypass Strait of Hormuz

Gulf oil producers are spending billions of dollars on an ambitious network of pipelines designed to route crude around the Strait of Hormuz, recognizing that reliance on the critical waterway remains a significant risk even if a cease-fire materializes. At least seven major pipeline projects are now under construction, in planning, or under discussion to push supplies out through the Red Sea, the Suez Canal, and the Gulf of Oman, according to Euronews.

A Critical Chokepoint Under Pressure

Before the war, roughly 15 million barrels of Gulf oil passed through the Strait of Hormuz every day, representing about one-fifth of the world’s traded oil. The waterway, bordered by Iran on one side and Oman and the UAE on the other, has long been one of the world’s most vulnerable maritime chokepoints, susceptible to disruption by mines, missiles, drones, and small boats.

With the Iran war reignited in July, Brent crude hit $100 a barrel for the first time since May, well above the roughly $72 it fetched after June’s short-lived truce. The war on Iran began on February 28, 2026, when the US and Israel killed Iranian Supreme Leader Ali Khamenei. Iran closed the Strait of Hormuz as a key strategic move, using the waterway as leverage. A US naval blockade has been in place against Iranian ports since mid-April.

“Depending so heavily on the Strait of Hormuz is no longer a prudent long-term strategy,” said Victoria Grabenwoger, senior researcher at the energy data firm Kpler, as CBS News reported.

Existing Routes Near Capacity

Two escape valves already exist, and both are close to their limits. Saudi Arabia’s East-West pipeline, built in the 1980s during the Iran-Iraq war, carries crude from the Abqaiq complex to Yanbu on the Red Sea. The UAE has been channelling more oil to Fujairah, its port on the Gulf of Oman about 145 kilometres south of the Strait of Hormuz.

Together, the two routes had spare capacity of some 3.5 to 5.5 million barrels a day before the war, and both now run close to full, representing around 6.5 million barrels a day, according to the US Energy Information Administration.

Abu Dhabi’s state oil company (ADNOC) is racing to finish a $3 billion, 300-kilometre pipeline to Fujairah, designed to lift deliveries by over 1.2 million barrels a day. The project is roughly half built, according to Kpler, which expects the official early-2027 completion target to slip to mid-2027 because the port itself must be expanded.

“The ambitious timeline has only become feasible against the backdrop of the Strait of Hormuz blockade,” Grabenwoger said, as Times of India reported.

Iraq’s $60 Billion Bet on Washington

Nowhere is the scramble more urgent than in Iraq, which draws about 90% of state revenues from oil exports and has had to cut output because of its dependence on the Strait of Hormuz. Prime Minister Ali al-Zaidi returned from Washington with 48 agreements signed with American firms worth more than $60 billion.

The centrepiece is a deal with Syria to rebuild the long-dormant pipeline running from the Kirkuk fields to the Mediterranean port of Baniyas. The US State Department called it “a critical energy corridor” with an initial capacity of 2 million barrels a day.

The Iraqi Ministry of Oil announced plans on August 10 for a major new pipeline network featuring two strategic export routes toward Faysh Khabur and the Syrian port of Baniyas, according to Iraqi News. The project will be executed under a BOOT framework with a consortium including Chevron, UCC, and TI Capital.

Youssef Qablawi, CEO of the Syrian Petroleum Company, said on August 4 that the Haditha-to-Baniyas pipeline will be operational within 30 months to three years, with a planned capacity of up to 2 million barrels per day, as TFTC reported. The pipeline corridor has been dormant since 2003, with reconstruction cost estimates ranging from $4.5 billion to $8 billion.

Washington’s ambassador to Turkey, Tom Barrack, predicted the agreements would render the Strait of Hormuz “an afterthought.” Baghdad is also weighing a line from Basra to Jordan’s Aqaba.

The Vulnerabilities of Alternative Routes

The Red Sea route has vulnerabilities of its own. Yemen’s Iran-backed Houthi rebels attacked two Saudi tankers, the Encelia and the Layla, in the Red Sea in late July, setting both on fire. The Houthis have previously disrupted shipping at the Bab el-Mandeb Strait, a maritime chokepoint carrying about 12% of world trade.

Pipelines themselves are not immune to attack. The Saudi East-West pipeline was shut down by a Houthi drone strike in May 2019. The Suez Canal cannot accommodate the industry’s largest tankers, which hold up to 2 million barrels per vessel. And pipelines don’t help with LNG exports: about one-fifth of the world’s LNG, much of it from Qatar, also transited the Strait of Hormuz before the war.

Reshaping Global Energy Supply Chains

Goldman Sachs analysts estimate that the planned bypass projects could carry 3.8 million barrels of oil a day by the end of 2027, rising to 7.3 million barrels a day by the end of 2028. That would shield around 60% of the Gulf’s pre-war oil exports of 23 million barrels a day from any disruption in the Strait of Hormuz, as Economic Times noted.

Treasury Secretary Scott Bessent called the Strait of Hormuz potentially “irrelevant” within two years as more oil moves through pipelines, according to 247wallst. The comment reflects a broader strategic shift in Washington, which is actively backing the infrastructure that reduces its own Hormuz leverage because the alternative, another military commitment to keep the strait open, is now the higher-cost option.

Geopolitical Implications

The pipeline push comes amid broader regional realignment. Saudi Arabia, Turkiye, and Pakistan signed the Mecca Joint Defence Agreement on August 7, reflecting Gulf states’ desire to diversify security arrangements beyond Washington, as Al Jazeera reported.

Meanwhile, President Trump has shifted to economic pressure on Iran rather than military force, citing the success of the naval blockade and Iran’s financial difficulties. “We are just watching Iran with its huge inflation and the fact they have no money,” Trump told Axios, as Al Jazeera reported. “It will work out. It always works out. It’s like a chess game.”

Mehran Kamrava, professor at Georgetown University in Qatar, expressed scepticism about whether economic pressure alone will succeed, noting that Iran has been able to exert considerable pressure on Gulf countries where US military assets are located.

What to Watch

Contract finalization for the Iraq-Syria pipeline is the near-term gate, with Qablawi expecting completion within three months. If that slips, the 30-month construction clock hasn’t started. The feasibility studies by Chevron and UCC Holding will also surface the real capacity numbers and cost figures.

The broader transformation underway across the Gulf reflects a determination to insulate critical revenue streams from geopolitical shocks. As the region spends billions to build redundancy into export corridors, the world’s energy map is being quietly but fundamentally redrawn. Whether these projects can deliver on their ambitious timelines, and whether they can withstand the same regional threats that made them necessary, will shape the next decade of global energy security.