Strait of Hormuz Closure Accelerates Search for Alternative Oil Routes
Global energy markets are adapting to the closure of the Strait of Hormuz as countries and companies race to secure alternative export routes. The strait, through which roughly one-fifth of the world's oil and gas traffic passed daily before the conflict, has been effectively shut since the US and Israel launched strikes against Iran in late February. Tankers are being attacked, and Gulf oil and gas exports are threatened, according to ABC Australia.
While oil prices initially surged after the closure, they have since dropped following a US-Iran ceasefire, though fears remain that renewed tensions could shut the waterway again. Analysts say global markets are not in "panic mode" because contingency plans are already in motion.
Existing and Planned Bypass Pipelines
Saudi Arabia has activated its East-West pipeline, which carries crude oil across a 1,200-kilometre system from the Abqaiq processing facility in the east to the Red Sea port of Yanbu. According to Dawn, this pipeline has reached its maximum capacity of 7 million barrels per day, with about 2 million barrels per day consumed by domestic refineries. That leaves roughly 5 million barrels per day available for export—considerably less than the kingdom exported before the conflict.
Saudi Arabia is reportedly considering expanding this pipeline's capacity to 9 million barrels per day, with sources telling Reuters that the kingdom is in preliminary talks with neighbours on the project. The United Arab Emirates has already diverted some exports away from Hormuz into its own pipeline, according to ABC Australia.
Iraq's exports have been "badly hit" by the strait's closure, and Kuwait remains "almost completely dependent" on the waterway, Dawn reports. Qatar is also considering several alternative routes for its exports, though details remain unclear.
Pipeline Via Israel Proposed
Israeli Energy Minister Eli Cohen has proposed a land route that would bypass both Iran and Yemen's Houthi rebels, who have frequently attacked Red Sea shipping. "The Gulf countries do not want to be dependent on either Iran or the Houthis when it comes to their oil exports, which are their primary source of income," Cohen told Reuters in an interview in Jerusalem. "If you create a land route, you bypass both Iran and the Houthis... The best route is through the State of Israel."
Israel already has pipeline infrastructure connecting Eilat on the Red Sea to Ashkelon on the Mediterranean. Cohen suggested a 700-kilometre pipeline from Saudi Arabia to Eilat, which would connect to existing infrastructure and allow oil to reach European markets via tankers from Ashkelon. Such an idea has been mooted before but was never developed due to Middle East tensions.
Market Impact and Future Outlook
Goldman Sachs analysts estimate that seven new pipelines are currently under discussion in the Middle East, which could collectively carry roughly 14 million barrels per day—about 60 per cent of the oil that was previously shipped through the strait—once operational, possibly by the end of 2028. Dawn reports these projects are part of broader efforts to "decouple and desensitise" global crude markets from Hormuz events.
Analysts argue the war has forced the world to reduce its heavy dependence on a single, narrow energy corridor, minimising Tehran's leverage. However, opinion is divided on the long-term viability of these alternatives, with ABC Australia noting that Iran recently threatened to expand its campaign to throttle global energy markets to the Red Sea route using its Houthi allies.
Global oil expert Carol Nakhle of Crystol Energy said markets have stabilised partly because "we never really lost all the barrels from the Middle East" due to Saudi Arabia's immediate response. Analysts suggest Iran can play its "Hormuz card" for weeks or months, but not indefinitely.