U.S. President Donald Trump has abandoned the toll, but not the pressure on the Strait of Hormuz. Twenty-four hours after proposing a levy equivalent to 20 per cent of cargo values in return for passage through the world’s most important energy artery, the US president on Tuesday replaced the plan with vague announcements of trade agreements and investments in the US by Gulf states.
The blockade of vessels travelling to Iranian ports, or carrying Iranian cargo, remains in place. Meanwhile, the US and Iran have resumed attacks, Washington has struck targets in the port cities of Bushehr and Bandar Abbas, and Brent crude has risen to $87.08 a barrel, its highest level in four weeks.
The conundrum: The speed with which the White House changed course is almost secondary to the signal sent to Gulf producers. The security of Hormuz has become still more exposed to the fluctuations of the conflict and to US decisions — a reflection of the fluid and at times unpredictable policymaking of the Trump administration.
- For Saudi Arabia, the United Arab Emirates, Qatar and Iraq, the answer therefore lies neither solely in diplomacy nor in military protection of commercial shipping. Increasingly, it lies in pipelines.
Building a way out. The conflict will certainly be remembered for triggering an oil crisis of historic proportions. But it may also come to be seen as the moment that accelerated efforts to reduce dependence on the world’s most important energy chokepoint.
- About 20 per cent of global oil supplies passed through Hormuz at the start of the war. Producers and operators are now looking for ways out.
- Goldman Sachs has recently examined seven groups of infrastructure projects, including pipelines already under construction, planned or considered potentially feasible. Combined with existing infrastructure, they could shield more than 45 per cent of Gulf producers’ prewar exports from future disruptions in the Strait by the end of 2027. By 2028, the figure could exceed 60 per cent.
The region’s energy geography has already begun to shift. The UAE is expanding its capacity to move crude to Fujairah, on the Gulf of Oman, bypassing the waters of the Persian Gulf. Iraq is working on a pipeline between Basra and Haditha and possible extensions into wider export networks. Saudi Arabia already operates its East-West pipeline to the Red Sea port of Yanbu, while further expansions and regional connections are under consideration.
- Individually, these projects will not eliminate the Hormuz risk. Collectively, they point to a broader transformation. Producers are trying to build an export system less dependent on a single maritime passage and increasingly oriented towards the Gulf of Oman, the Red Sea and, potentially, the Mediterranean.
The crisis has also changed the economic calculation. Under normal circumstances, infrastructure projects of this scale face financial, political and bureaucratic obstacles. Supply disruptions tend to compress those timelines.
- Goldman’s analysis of nine previous pipeline projects found a median completion time of about two and a half years, with projects launched in response to supply shocks tending to move faster.
More than an oil story. The consequences would extend well beyond the energy market.
- For decades, Hormuz has been both a commercial chokepoint and a multiplier of geopolitical power. The concentration of energy flows through the Strait has given Iran leverage over markets, made freedom of navigation a strategic international interest — above all for the US, but also for Europe — and embedded a geopolitical risk premium in the price of oil.
- A gradual diversification of export routes could weaken all three. Washington’s position captures the paradox. Trump initially proposed charging users of the Strait for part of the cost of protecting it, before replacing the plan with trade agreements and investments in the US.
- The White House is seeking to turn America’s role as the region’s security provider into an immediate and lasting economic dividend. Yet Gulf producers face a more complicated calculation. Protecting shipping routes requires US military power today. Building new pipelines will still require security tomorrow — and, for now, that too means American protection.
- Diversification may therefore alter the geography of the region’s vulnerabilities without necessarily ending its dependence on Washington.
Shifting the risk. There are also clear limits to the transformation. Even after alternative infrastructure is built, between 7mn and 9mn barrels a day of crude and refined products would remain exposed to disruption in the Strait.
- Pipelines shift vulnerability rather than eliminate it. Vast networks crossing the region can become targets for drones, missiles, sabotage or armed groups. Moving oil away from a maritime chokepoint may reduce one form of strategic exposure while creating others across land routes that are difficult and expensive to defend.
- Hormuz will therefore remain central to the global energy market. But centrality and dependence are not the same thing.
The bottom line: The war has once again demonstrated the importance of the Strait of Hormuz. Yet that demonstration is itself increasing the economic and strategic incentives to build alternatives. The US is using military power to reaffirm its role in securing the world’s most important oil artery, while Iran and the Gulf producers continue to measure part of their regional influence through the waters surrounding it.
- The military and diplomatic outcome of the conflict remains uncertain. The pipelines being designed to survive the next crisis, however, could end up changing the regional balance long after this war is over.
