Gulf Countries Invest Billions of Dollars in Building an Alternative Channel to Reduce Reliance on the Hormuz Strait
BlockBeats News, August 31st. As the Iran war continues to disrupt shipping in the Strait of Hormuz, countries such as Saudi Arabia and the UAE are accelerating their investments in port, pipeline, and railway projects to bypass this key energy route. Prior to the conflict, the Strait of Hormuz carried about one-fifth of the world's oil flow, but current traffic remains well below normal levels.
Saudi Arabia is considering expanding the east-west crude oil pipeline that connects the eastern oil-producing region to the port of Yanbu on the Red Sea. The pipeline currently has a daily capacity of about 7 million barrels, and Saudi Arabia is contemplating adding an additional 1 to 2 million barrels per day. They are also discussing allowing neighboring countries to utilize this network to bypass the Strait of Hormuz.
The UAE, on the other hand, is pushing forward with the development of the Fujairah Port. DP World agreed in July to develop two new terminals under a 50-year concession agreement. The Al Rugaylat container and multipurpose terminal has an annual handling capacity of up to 2.5 million TEUs, while the Dibba general cargo terminal will add 3.6 million tons of cargo handling capacity. Additionally, Abu Dhabi is progressing on a new crude oil pipeline expected to start operations in 2027, which is poised to double the UAE's crude oil export capacity through Fujairah, bypassing the Strait of Hormuz.
The blockade in the Strait of Hormuz has already had a significant impact on the Gulf economies. A July Reuters survey projected an 8.1% economic contraction for Qatar and Kuwait in 2026, while Saudi Arabia is expected to grow by 1.4%. Qatar is particularly hard hit as its liquefied natural gas (LNG) exports heavily rely on the Strait of Hormuz, with LNG exports plummeting by 96% since the start of the war.
Shipping recovery remains limited. Preliminary data from Kpler shows that last Thursday, only 7 bulk commodity vessels passed through the Strait of Hormuz, compared to an average of 15 vessels over the previous 10 days. Gulf countries are using this opportunity to accelerate the construction of alternative energy and trade routes along the Red Sea and the Arabian Sea coasts to reduce future strategic dependence on a single maritime chokepoint.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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