Gulf Exporters Scramble to Bypass Hormuz After Iran War Exposes Single-Point Risk
The recent Iran war has exposed the dangers of relying on a single chokepoint for vital oil and gas exports, prompting Gulf governments to diversify at all costs. The Strait of Hormuz, which accounts for a fifth of the world's oil and liquefied natural gas supplies, was effectively blocked by Iran during the conflict, triggering unprecedented turmoil across the region's vast energy industry.
Saudi Arabia offers a clear example of the benefits of building pipelines that circumvent Hormuz. The country diverted around 60% of its shipments to the Red Sea port of Yanbu before the war, using a cross-country pipeline from the Gulf coast built by state-owned Saudi Aramco in the 1980s.
As a result of this strategic foresight, Saudi Arabia's economy is expected to grow by 3.1% in 2026, down just 1.4 percentage points from its pre-war forecast. In contrast, Qatar could see its economy contract by 8.6% this year after growing by 2.8% in 2025, according to the International Monetary Fund.
The United Arab Emirates was able to partially bypass Hormuz using its pipeline to the Fujairah oil terminal, located just outside the Strait. Abu Dhabi is now accelerating construction of a second pipeline to double export capacity via Fujairah by 2027.
Other regional players are also taking note of the need for diversification. Gulf national oil companies are increasingly looking to expand overseas operations, effectively creating a hedge against future regional disruption. This trend is apt to accelerate as acquiring stakes in upstream assets, refineries, LNG facilities, and storage terminals abroad would provide valuable income streams that are insulated from Gulf risk.
The quest for diversification will reshape international alliances, shake up long-term government strategy, and redirect investment in the region.