Key facts
- The Iran war has led to increased oil shipping costs and supply uncertainty.
- Gulf states are investing in alternative oil and gas export routes to bypass the Strait of Hormuz.
- Saudi Arabia is utilizing its East-West pipeline to reroute exports to the Red Sea.
- The UAE plans to double its pipeline export capacity to Fujairah.
- TotalEnergies is participating in pipeline expansion projects in the UAE and Iraq.
- Investment in port infrastructure is becoming a critical priority for Gulf states.
The ongoing conflict involving Iran has significantly disrupted oil and gas flows from the Persian Gulf, leading to increased costs and supply uncertainty for energy-importing nations. In response, Gulf states are accelerating efforts to build alternative export routes that bypass the Strait of Hormuz.
Saudi Arabia has utilized its East-West pipeline to reroute up to 7 million barrels of crude daily to the Red Sea. However, security concerns in the Red Sea due to Houthi activity have necessitated further rerouting through the Suez Canal, which has limited capacity. The United Arab Emirates is planning to double the export capacity of its pipeline to Fujairah, a port outside the Strait of Hormuz, to 3.6 million barrels daily.
Major energy companies are involved in these infrastructure projects. TotalEnergies will participate in the UAE's pipeline expansion and a project to build a pipeline through Syria to the Mediterranean coast for Iraqi crude. Iraq is also exploring options to repair an existing pipeline with Syria and expand oil flows via the Kirkuk-Ceyhan pipeline to Turkey. Kuwait is in discussions with the UAE and Saudi Arabia to expand regional pipeline networks.
Japan has agreed to provide financial support for the pipeline network expansion, recognizing its dependence on Middle Eastern oil imports. Investment in port infrastructure is also a critical priority for Gulf states to manage the economic consequences of the war's impact on tanker traffic. The U.S. has continued military actions in the Strait of Hormuz, indicating the geopolitical crisis is likely to persist and reshape the region's risk profile.