Iran repeatedly threatens to close Strait of Hormuz, neighboring countries seek alternative routes

Recently, the conflict between Iran and Israel has stirred up the international petrochemical market. In particular, after the United States launched airstrikes on Iranian nuclear facilities, Iran's parliament voted to close the Strait of Hormuz, further heightening tensions in the global petrochemical market. As a critical artery carrying nearly 20% of the world’s oil supply and a major route for liquefied natural gas (LNG) shipments, closing the Strait of Hormuz could pose a direct and far-reaching threat to the global economy. Although the situation has eased somewhat, neighboring countries are still preparing preemptively, seeking alternative routes to minimize the impact on themselves. However, current efforts appear insufficient to offset the consequences of a closure of the Strait of Hormuz.

Saudi Arabia Expands East-West Pipeline

As the leading member of OPEC and the world’s largest oil exporter, Saudi Arabia’s key alternative to bypassing the Strait of Hormuz is its east-west pipeline with a capacity of 5 million barrels per day (bpd). This pipeline connects Saudi Arabia’s main crude production facilities to Yanbu Port on the Red Sea and Ras Tanura on the Persian Gulf.

According to S&P Global Commodity Insights maritime data, most of the crude oil from Saudi Aramco, the state-owned oil giant, is exported through Ras Tanura. As of June, the port averaged daily crude exports of 5.3 million bpd, making it the largest crude export terminal in the Persian Gulf region.

Although the east-west pipeline could potentially increase its capacity to 7 million bpd in the short term, even if all crude were rerouted to Yanbu on the western end, it would still not fully compensate for the export volume from Ras Tanura. Robin Mills, CEO of consultancy Qamar Energy, noted that the pipeline normally transports about 1 million bpd, and its maximum capacity of 7 million bpd has yet to be tested in practice.

S&P Global Commodity Insights data shows that in June, crude exports from Yanbu on Saudi Arabia’s Red Sea coast averaged only 608,000 bpd. Moreover, shipping in the Red Sea has been hazardous since November 2023, when Yemen’s Houthi militants began attacking vessels in and around the Bab el-Mandeb Strait. While Saudi Aramco could reroute tankers northward through the Red Sea and the Suez Canal into the Mediterranean, this would significantly increase costs for exports to key Asian customers.

Mills said: “Another issue is that, based on existing storage tanks at Yanbu, Saudi Aramco can currently only export Arab Light and Arab Heavy crude from there. But in an emergency, they might have to blend other grades.” Previously, Saudi Arabia has also used Egypt’s 2.5-million-bpd Suez-Mediterranean pipeline (SUMED) to bypass the Bab el-Mandeb Strait.

UAE Bets on Fujairah Port

In the UAE, Fujairah Port—located outside the Strait of Hormuz—is the endpoint of the 1.5-million-bpd Habshan pipeline, which serves as an alternative to export Murban crude from Abu Dhabi via terminals inside the Persian Gulf such as Ruwais, Jebel Ali, and Zirku.

However, according to S&P Global Commodity Insights maritime data, the pipeline’s capacity falls well short of the UAE’s total crude exports of 3.5 million bpd. Abu Dhabi National Oil Company (ADNOC) produces most of the UAE’s crude, including heavier grades such as Upper Zakum, Das, and Umm Lulu, in addition to low-sulfur Murban crude. Mills said: “ADNOC could shift about 1.8 million bpd of crude to Fujairah, although currently they can only transport onshore crude there.”

The UAE has been preparing for a potential closure of the Strait of Hormuz by developing large underground caverns in the mountains near Fujairah as crude storage facilities, with a total capacity of 42 million barrels, and plans for further expansion are underway. Mills said: “The UAE has already started using Fujairah for most of its crude exports, so it appears feasible for Emirati oil to bypass the Strait of Hormuz.”

Turkey Proposes New Pipeline

As OPEC’s second-largest oil producer, Iraq exports nearly all its crude through Basra, located on the Persian Gulf coast. Its 450,000-bpd northern pipeline to Turkey (ITP) has been shut since March 2023 due to disputes with the Kurdish region, but Turkey has proposed building a new pipeline from Basra to Ceyhan.

Shwan Zulal, managing director of Carduchi, a consultancy focused on the Kurdish region, said: “If the Strait of Hormuz closes, there may be renewed momentum to reopen the ITP.” However, unresolved issues such as repayment of past debts, Baghdad withholding salaries for the Kurdish regional government, and other contractual disagreements make reaching an agreement difficult. Zulal said: “The problems between the parties cannot be resolved quickly, so unless the strait remains closed for an extended period—an unlikely scenario—reopening the ITP is not a quick fix.”

Iraqi Oil Minister Hayan Abdulghani stated that Iraq is exploring alternatives to bypass the Strait of Hormuz but did not elaborate on its plans.

Turkey’s proposed new pipeline would transport oil and gas from Iraq’s resource-rich Basra region to Ceyhan, enabling Baghdad to bring more crude to market while advancing Turkey’s ambition to become a major regional energy hub. Turkish Energy Minister Alparslan Bayraktar revealed these plans to S&P Global Commodity Insights in April, saying that an existing pipeline running from Silopi in southern Turkey to Ceyhan needs to be connected to Basra’s oil fields to achieve a capacity of 1.5 million bpd, thereby largely bypassing the Kurdish region.

For other major Gulf producers—including Kuwait, Qatar, and Bahrain—there are currently no viable alternative export routes to replace the Strait of Hormuz. Maritime data shows that in June, combined crude exports from Qatar, Kuwait, and the neutral zone jointly owned by Kuwait and Saudi Arabia totaled 2.4 million bpd. Iran itself primarily exports 1.5 million bpd of crude from Kharg Island in the Persian Gulf, while its second export facility at Jask on the Oman Sea is under construction. All these logistical constraints mean that a closure of the Strait of Hormuz would almost immediately tighten oil supplies and trigger sharp price increases.