Oil exporters scramble for routes beyond Hormuz — but options are constrained

Middle Eastern oil and gas producers are still scrambling to find and expand alternative routes for their exports, almost two months after the critical Strait of Hormuz was effectively shut to commercial traffic.

There is still little clarity on when or how the U.S.-Iran conflict can be brought to an end, and both sides are using the Strait of Hormuz — a vital waterway through which around 20% of the world’s oil was shipped before the war — as a bargaining chip in stop-start peace talks.

The channel’s double-blockade has supercharged global energy prices and highlighted the global energy market’s vulnerability when key waterways and “chokepoints” — like the Strait of Hormuz, Panama Canal or Suez Canal — are blocked, whether by accident or by design.

The IEA’s Executive Director Fatih Birol told CNBC Thursday he felt like a “broken record” telling countries to diversify energy supply routes years before the current crisis.

“The $110 trillion global economy can be taken hostage by a couple of hundred men with guns across a 50-kilometer stretch of strait — it doesn’t make sense at all. We should make alternative routes, alternative options,” he told CNBC’s Steve Sedgwick.

Risks around the Strait of Hormuz “were well understood” for years, Maisoon Kafafy, senior adviser to the Atlantic Council’s Middle East programs, told CNBC, but the war has shown how deep those vulnerabilities are — and the need for change.

“Hormuz has been the world’s most documented energy chokepoint for decades, and its risks were mapped, modeled, and priced into infrastructure decisions across the region,” she said.

“Until the February 2026 closure, the costs, while significant, did not reach the threshold that would justify the scale of investment alternative infrastructure requires. The deterrent architecture and economic interdependencies surrounding the strait made full closure seem too costly to any actor to contemplate seriously. The closure has demonstrated that those assumptions were breakable,” Kafafy said.

The Iran war is shifting that cost-benefit analysis, while Gulf oil producers — now highly wary of the threat posed by the Islamic Republic and fearful of being beholden to forces beyond their control in the future — are finally looking beyond the Strait of Hormuz for exports.

“The war has also accelerated investments in bypass routes. So, other countries are re-routing. That means that Iran, and its main strategic leverage, weakens,” Lucila Bonilla, lead emerging markets economist at Oxford Economics, told CNBC Tuesday.

Tehran’s strategy to block the vital maritime channel appeared to pay off in the early days of the war. By controlling access in and out of the strait, Iran was effectively the only country that could export hydrocarbons for several weeks as oil prices rocketed toward $120 a barrel.

The U.S.’ naval blockade of Iranian ports, which began in mid-April, has “neutralized” that strategic advantage, Bonilla said. But Gulf producers are still in the same predicament, unable to export oil and LNG via the strait.

While Saudi Arabia and the United Arab Emirates (UAE) have some oil export routes that do not transit the waterway, others, including Iran, Iraq, Kuwait, Qatar and Bahrain, rely on the strait to deliver the vast majority of their oil exports, the International Energy Agency says.

Most of the exports are destined for Asia, with China, India and Japan being the main importers, the IEA adds. The vast majority of the UAE and Qatar’s LNG exports also transit the passage.

Both Saudi Arabia and the UAE have oil pipelines that bypass the waterway — the East-West pipeline and the UAE’s Habshan–Fujairah (or ADCOP) pipeline — but neither can handle as much oil as is transported via the Strait of Hormuz.

The East-West pipeline, linking processing facilities near the Persian Gulf to an export hub on the Red Sea, and the UAE pipeline to the port of Fujairah, have a combined estimated 3.5 – 5.5 million barrels per day (mb/d) of available capacity, the IEA notes, although Saudi said in March its pipeline is pumping 7 mb/d.

These figures, however, are far less than the roughly 20 million barrels of oil and petroleum products that transited through the Strait of Hormuz every day before the war.

Developing alternative export routes involves not only massive investment in infrastructure, but time. Often transnational agreements are necessary if pipelines pass through several territories and security — something in short supply when Iran has shown no compunction in attacking neighbors’ energy facilities.

“Expanding existing infrastructure … can happen on a relatively compressed timeline if the political commitment is there,” Kafafy told CNBC.

“The more complex question is building the kind of networked, multi-corridor architecture that would deliver genuine resilience,” including “route diversity” — and enough exit corridors terminating in different sea basins ensuring no single blockage removes the majority of export capacity simultaneously — and “exit-point security,” Kafafy said.

That meant “the ability to protect terminal infrastructure against the same adversarial pressure that closed the primary chokepoint,” she added.

The war has shown that existing alternative routes are at risk; Saudi’s East-West pipeline was attacked by Iran in April, throughput by 700,000 barrels per day. The port of Fujairah (the end-point of the UAE pipeline) has also come under attack from Iranian drones, disrupting oil loading operations at its crude export terminal.

The IEA notes that there is also an LNG pipeline running parallel to Saudi’s East-West pipeline, the Abqaiq-Yanbu NGL pipeline, with a capacity of 300 kb/d, but this is already “fully utilized” with no spare capacity.

There are some “alternative alternatives” to the major pipelines, but capacity remains weak.

Nevertheless, several Middle Eastern states are exploring proposed new routes, or reviving old projects, as they look to diversify supply routes away from the Strait of Hormuz.

For example, Iraq has an almost 600-mile pipeline to Turkey, which has a total capacity of around 1.6 mb/d. The pipeline had been closed but will be reopened soon due to the Hormuz disruption, reportedly with an initial capacity of 250,000 barrels per day.

Iraq is also considering long-considered pipelines to Oman, Jordan and Egypt, although these projects were previously put aside due to costs, conflict and security threats.

Iran could resort to using Jask oil terminal to bypass the Strait of Hormuz. The pipeline can transport crude from the Goreh-Jask pipeline to the Gulf of Oman and has a reported capacity of 1 mb/d, but the IEA says both the pipeline and port “effectively remain non-operational.”

“A test load was exported from Jask in late 2024, but no further oil has been exported from Jask since then. The terminal is currently not considered a viable crude export option for Iranian crude,” the IEA said in February.