Iran’s stranglehold over the Strait of Hormuz remains, but global oil markets could all but eliminate their dependence on the disputed waterway in a few years.
Despite more than a week of daily bombardment, the U.S. military has failed to secure an alternative corridor through the strait that bypasses the route approved by Iran, as the regime’s drones and missiles deter merchant ships.
On Friday, no intersections via the US-backed route were detected and no “shadow fleet” movements were recorded, while the Iranian broadcaster recorded seven transits.
The US assurances were inadequate. The military said via maritime radio that “U.S. forces stand ready to maintain freedom of navigation and protect lawful commerce consistent with international law. The southern route of the strait remains open.”
But one sailor replied loudly: “Damn!” Recording checked by the Wall Street Journal.
India has banned all Indian crew members from sailing through the strait until further notice after an Iranian attack killed a sailor. Likewise, the chairman of Japan’s Foreign Trade Council said the strait would be a no-go zone for merchant ships as long as fighting continues.
Before the United States and Israel began their war against Iran in late February, about 20 million barrels of oil were traveling through the Strait of Hormuz every day.
Iran’s shutdown triggered the world’s biggest oil shock ever, but markets struggled to find solutions to help soften the blow. More ships went “dark” and slipped through the strait undetected, and oil supplies were heavily exploited.
Supplies were also diverted through land-based routes, notably Saudi Arabia’s East-West Pipeline and the United Arab Emirates’ Habshan-Fujairah Pipeline. Both countries have also used railway corridors.
Thousands of trucks were also on the road Crude oil from Iraq to Syrian ports on the Mediterranean coast. In fact, Syria now handles more than a quarter of the Middle East’s volume, having shipped none just a few months ago.
Meanwhile, Kuwait is in talks with Saudi Arabia and the United Arab Emirates to extract its oil from the Persian Gulf by expanding its neighbors’ pipeline systems.
More throughput is on the way.
The United Arab Emirates has accelerated its new west-east pipeline, which is already 50% complete and could be operational early next year. according to Köpler. This will be in addition to expanding the capacity of its Habshan-Fujairah pipeline as Saudi Arabia expands its east-west pipeline.
A consortium that includes Chevron plans to rebuild the pipeline from Kirkuk in northern Iraq to the Syrian port of Baniyas on the Mediterranean after it was damaged in the Iraq War two decades ago.
And Turkey has proposed extending the Kirkuk-Ceyhan pipeline south to Iraq’s Gulf coast port of Basra, creating another Mediterranean export channel that reduces dependence on Hormuz.
Analysts from Goldman Sachs In a note last week, the company estimated that enough Middle East pipeline capacity will likely be added to isolate over 45% of prewar Gulf exports by the end of next year.
By the end of 2028, this value could rise to over 60%, and even to 75% in an “accelerated scenario”.
Goldman put the average construction time for pipeline projects in the region at 2.5 years, “with construction typically occurring more quickly in response to supply disruptions.”