Full Breakdown
Gulf Oil Producers Accelerate Pipeline Projects to Bypass Blockaded Strait of Hormuz
7/24/2026, 2:33:44 AM
Core Event: Blockade of the Strait and Surge in Oil Prices
In July 2026 the renewed Iran-Saudi conflict closed the Strait of Hormuz, which had carried roughly 15 million barrels of Gulf oil daily—about one-fifth of global trade. Brent rose above $100 a barrel and U.S. WTI past $90, prompting Gulf states and Iraq to fast-track pipeline projects to reroute oil through the Red Sea, the Suez Canal, and the Gulf of Oman.
Background & Context
The Gulf’s reliance on Hormuz dates back decades. Saudi Arabia built the East-West pipeline in the 1980s after Tehran threatened shipping during the Iran-Iraq war. The United Arab Emirates has used Fujairah on the Gulf of Oman as an alternative outlet. Yemen’s Iran-backed Houthi rebels have previously targeted the Bab el-Mandeb Strait and the Saudi East-West pipeline, which was shut by a drone strike in May 2019.
Data & Statistics
- Pre-war flow: ~15 million bpd through Hormuz.
- Spare capacity of existing pipelines: 3.5–5.5 million bpd (EIA).
- Current utilization: Saudi and UAE pipelines now handle about 6.5 million bpd.
- Abu Dhabi pipeline: $3 billion, 300-km line to Fujairah, half built, slated for mid-2027; expected to add >1.2 million bpd.
- Projected added capacity: Goldman Sachs estimates the new projects could supply an additional 3.8 million bpd by the end of next year and 7.3 million bpd by 2028.
- Potential bypass share: Roughly 60 % of the Gulf’s pre-war export volume of 23 million bpd could be rerouted if all projects materialize.
Official Statements & Responses
U.S. ambassador to Turkey Tom Barrack said the agreements signed by Iraqi Prime Minister Ali al-Zaidi would render Hormuz “an afterthought.” The State Department called the Iraq-to-Syria pipeline a “critical energy corridor,” noting its initial 2 million bpd capacity.
On-the-Ground Reports
Houthi rebels announced attacks on two Saudi tankers, the *Encelia* and the *Layla*, setting both ablaze in the Red Sea. Saudi state media confirmed a fire on the *Encelia* with no casualties, while the UK Maritime Trade Operations centre reported an “unknown projectile” striking a tanker southwest of Al Shuqaiq. These incidents highlight the vulnerability of alternative routes.
Conflicting Reports & Gaps
- Spare capacity figures: Some sources cite 3.5–5.5 million bpd, others a single 3.5 million bpd figure.
- Abu Dhabi pipeline timeline: Kpler expects early 2027; later statements suggest mid-2027 due to port expansion at Fujairah.
Both discrepancies remain unresolved in publicly available data.
What’s Next
Iraq is pursuing multiple export corridors: a pipeline from Basra to Turkey’s Ceyhan port with a branch to Syria’s Baniyas (targeting 2 million bpd), and talks with Jordan on a Basra-Aqaba line to the Red Sea. The Abu Dhabi pipeline aims for mid-2027 completion, while other Gulf projects are slated for phased roll-outs through the late 2020s. Ongoing Houthi activity in the Red Sea and Bab el-Mandeb Strait remains a risk for the new routes.
