Gulf States Build Pipelines to Bypass Strait of Hormuz as Iran Blocks Oil Route

Iran’s drone and mine attacks on tankers in the Strait of Hormuz have forced the world’s oil producers to rethink their export routes. About 20 million barrels of oil cross the strait daily, roughly one-fifth of global consumption. Gulf states are now racing to build pipelines and ports that could bypass the chokepoint entirely, with capacity potentially reaching 14 million barrels per day by end of 2028.

How Saudi Arabia and UAE are routing around Iran

Saudi Arabia has been diverting crude through its East-West pipeline, a 1,200-kilometre system built in the early 1980s that connects the Abqaiq oil processing facility in the east to the Red Sea port of Yanbu in the west. The UAE plans to double its export capacity outside Hormuz by completing a second pipeline to the Port of Fujairah on the Gulf of Oman. Saudi Arabia is considering expanding its pipeline to the Red Sea by 2 million barrels per day, according to people close to the matter.

Iraq’s production collapse and US-backed pipeline plan

Iraq, OPEC’s second largest producer, has been hit hardest. Its production fell more than 50% in June to 1.9 million barrels per day, compared to 4.2 million before the conflict began in February. The U.S. is supporting Iraq’s effort to rebuild a crude oil pipeline that runs from its northern city of Kirkuk through Syria to the Mediterranean Sea, with U.S. companies expected to play a role in construction.

Seven new pipelines could reshape Middle East exports

Goldman Sachs analysts identified seven pipelines either under construction or in planning phase across the Middle East. Pipeline capacity in the region could grow to more than 14 million barrels per day by the end of 2028, representing more than 60% of the seven Gulf states’ pre-war export volume of 23 million barrels per day. However, analysts warn these pipelines are a geopolitical hedge rather than a full replacement for the strait.

Fertilizer shortages threaten Australia and the US

About 33% of the world’s fertilizers, including sulfur and ammonia, pass through the Strait of Hormuz. Disruptions have already caused urea prices to rise to $450 per tonne in Saudi Arabia, up from $402. Kpler data shows sulfur and urea supplies will decline by 44% and 30% annually in 2026. In the first five months of 2026, U.S. shipments of nitrogen fertilizers fell 31% and potash fertilizers fell 56%, threatening Australian and American agricultural production.

Final Thoughts

While new pipelines offer long-term relief, they cannot fully replace the strait’s capacity or eliminate Iran’s leverage. Australians face higher petrol and fertilizer costs until these projects complete, likely by 2028. The crisis has exposed how dependent global energy markets remain on a single chokepoint.

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