Gulf States Invest Billions to Build Alternative Routes and Reduce Dependence on the Strait of Hormuz

Saudi Arabia, the UAE, and other Gulf states are accelerating investments in ports, pipelines, and railway projects to bypass the Strait of Hormuz. This strait once carried one-fifth of the world's oil flow, but current traffic levels are far below normal. Saudi Arabia is studying the expansion of an oil pipeline connecting its eastern oil-producing region to the Red Sea port of Yanbu, considering increasing its daily capacity from 7 million barrels by 1 to 2 million barrels and exploring the possibility of allowing neighboring countries to utilize this network. The UAE is fast-tracking the development of Fujairah Port, with DP World agreeing to develop two new terminals under a 50-year concession, with an annual handling capacity of up to 2.5 million TEUs. The Dibba general cargo terminal will add 3.6 million tons of handling capacity. Additionally, Abu Dhabi is advancing a new oil pipeline expected to be operational by 2027, which could double the UAE's oil export capacity through Fujairah, bypassing the Strait of Hormuz. Disruptions in the Strait of Hormuz have impacted the Gulf economies, with a Reuters survey predicting that Qatar and Kuwait's economies will shrink by 8.1% in 2026, while Saudi Arabia is expected to grow by 1.4%. Qatar's liquefied natural gas exports heavily rely on the Strait of Hormuz, and since the outbreak of war, LNG export volumes have dropped by 96%. Shipping recovery has been limited, with only 7 bulk carriers passing through the Strait of Hormuz last Thursday, below the 10-day average of 15 vessels. Gulf states are accelerating the construction of alternative energy and trade routes to reduce dependence on a single maritime chokepoint.

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