Gulf States Pour Billions into Hormuz Bypass Pipelines as Strait Closure Enters Fourth Month
Gulf producers are racing to build around the Strait of Hormuz, but new routes can't replace the 20 million bpd still blocked.
More than 1 billion barrels of oil have been lost since the Strait of Hormuz closed, and nearly 100 million additional barrels are being lost every week the waterway stays shut, ADNOC CEO Sultan Ahmed Al Jaber said on Wednesday (2026-05-20).1 ICE Brent front-month traded at $91.33/bbl as of Tuesday (2026-09-01) 05:49 UTC, barely moved from prior sessions, while Dubai crude sat at $88.72/bbl and Urals at $77.98/bbl.1
That price stability masks a supply shock that has forced Gulf producers into their most aggressive infrastructure push in decades. The UAE has built nearly 50% of a second pipeline bypassing Hormuz, with Abu Dhabi Crown Prince Mohammed bin Zayed ordering state-owned ADNOC to fast-track the West–East 1 Pipeline to double export capacity via Fujairah Port by 2027.3,1
Saudi Arabia is weighing an expansion of its East-West crude pipeline by as much as 2 million barrels per day, according to Reuters.5 The existing line, built in the early 1980s, can move up to 7 million bpd from the kingdom's eastern oil fields to the Red Sea export terminal at Yanbu.5
The United States backs plans by Iraq and Syria to rebuild a damaged pipeline that would carry crude from Kirkuk to Syria's Mediterranean coast, bypassing Hormuz entirely.6 The US-backed route would offer another outlet for Iraqi volumes, though Syria's pipeline network has been degraded by more than a decade of conflict.6
The urgency is easy to explain. The UAE has already redirected some exports through an existing pipeline to Fujairah, but that line maxes out at 1.8 million bpd.1 Iran has largely kept the strait shut, and Al Jaber warned global oil flows may take at least four months to recover to 80% of pre-conflict levels even if the war ends immediately.2
Yet the economics of these projects are brutal. New routes take years and billions of dollars, and existing pipelines cannot replace normal Hormuz volumes, according to the International Energy Agency.7 The IEA also sees global investments in oil projects falling for a third straight year, as the supply shock shifts priorities toward new trade routes rather than conventional production.4
That investment pattern creates a paradox for traders. Brent holds near $91/bbl with little volatility, but the physical market is missing tens of millions of barrels weekly.1 The futures curve appears to be pricing a resolution that has not arrived, while the Gulf states are spending billions on infrastructure that will not be ready until long after the conflict ends.
Al Jaber put it plainly: "Right now, too much of the world's energy still moves through too few chokepoints."1 The comment came as ADNOC confirmed the first new pipeline is roughly half complete, a pace that suggests the UAE's Fujairah expansion could come online ahead of the 2027 target.1,2
For now, the market's calm is the anomaly. The strait has been closed long enough to erase more than a billion barrels of supply, and the replacement capacity being built will not be ready for years.1 Traders watching the Brent-Dubai spread and the persistent discount on Urals crude are seeing a physical market that remains disconnected from a futures curve that has grown complacent.1
The next signal is project sanctioning. Saudi Arabia has not committed to the East-West expansion, and Iraq-Syria pipeline talk has yet to produce a formal agreement.5,6 Until those projects move from consideration to construction, the Gulf's only real hedge against Hormuz is a pipeline network that was never designed to carry the volumes now being rerouted.7