Pipeline Blitz Could Cut Strait of Hormuz Oil Reliance to 25% by 2028

The Pipeline Surge to Ditch Hormuz

For six weeks since the U.S. and Israel launched air strikes against Iran, the Strait of Hormuz has been a closed door for the 20 million barrels a day of crude that once traversed it. Despite daily bombardment, American warships have been unable to open a southern bypass that Iran’s drones and missiles have rendered too dangerous for commercial owners. No ship has taken the U.S.-protected route, while Iran’s own channel registered seven transits last week. India has barred its sailors from any strait passage after a drone strike killed a crew member, and Japan’s main trade body labeled the waterway a no-go zone until fighting ends.

The immediate scramble for workarounds has already reshaped the oil map. Tankers went dark, strategic stockpiles were drained, and land-based pipelines became the lifeline. Saudi Arabia’s East-West line and the UAE’s Habshan-Fujairah link pumped alternative supplies toward terminals outside the Gulf. Even Syria, which shipped no Middle Eastern crude months ago, now handles more than a quarter of the region’s volumes via Iraqi overland routes.

Now a new, faster infrastructure race is underway. The UAE has fast-tracked a second West-East pipeline, already 50% built and possibly online early next year. Kuwait is in talks with Saudi Arabia and the UAE to piggyback on their networks. Chevron wants to rebuild the damaged Kirkuk–Baniyas line from northern Iraq to the Syrian Mediterranean coast, and Turkey has proposed extending the Kirkuk–Ceyhan pipeline south to Basra, creating another Mediterranean outlet that bypasses Hormuz entirely. Goldman Sachs estimates that enough new capacity will be added to insulate 45% of pre-war Gulf exports by end-2027, more than 60% by end-2028, and as much as 75% under an accelerated scenario.

How the Middle East Is Rewiring Global Oil Routes

Iran’s Chokehold and the American Stalemate

The military reality is stark: after weeks of bombardment, Tehran retains de facto control of Hormuz passage. Ships will not risk the U.S.-backed corridor because Iran’s anti-ship arsenal—drones, shore-based missiles, fast attack craft—makes insurance and crewing impossible. This has turned the strait into an Iranian administered tollgate while exposing the limits of naval power projection when the opponent controls the nearby coast. The U.S. promise of navigation freedom has been undone by the commercial industry’s refusal to test it.

Pipelines, Not Warships, Are Reordering Trade

The real countermove is the pipeline bonanza. The UAE’s second West-East line, fed from Abu Dhabi’s fields, will nearly double the country’s capacity to ship crude from Indian Ocean ports outside the Gulf. Saudi Arabia is expanding its Petroline (East-West) system to carry more barrels to Yanbu on the Red Sea. Kuwait, boxed into the Gulf’s northern end, now depends on a deal with Riyadh and Abu Dhabi to evacuate its crude via their networks—a negotiation that will test Gulf solidarity. Chevron’s planned resurrection of the Kirkuk–Baniyas pipeline could restore a pre-Iraq War artery and give northern Iraqi crude a short path to the Mediterranean. Turkey’s proposal to link Basra with Ceyhan would be the most ambitious, creating an all-land route from Iraq’s southern fields to European refineries. Each project faces political and engineering hurdles, but the war has given them license to skip years of regulatory delay.

The New Oil Map: Syria, Turkey, and the Mediterranean Comeback

Syria’s sudden emergence as a transit hub is the most visible sign of the shift. Before the war, Mediterranean outlets handled negligible Gulf volumes; now, the overland route through Iraq to Syrian ports claims a quarter of Middle Eastern exports. This creates winners—pipeline host nations that can charge transit fees, Mediterranean terminals that suddenly have feedstock, and tanker operators repositioning to Egyptian and Turkish loading points. It also reshapes the pricing of crude streams: sour Gulf grades moving via pipeline may command different premia when delivered to the Med instead of Asia.

Goldman’s Projections and the Market’s Bet

The bank’s timeline is aggressive but built on announced projects: 45% insulation by end-2027 reflects work already in progress, while the 60-75% bracket to end-2028 assumes the accelerated completion of UAE, Saudi, and Iraqi expansions. These numbers are not guarantees; they rest on assumptions about political stability in Iraq and Syria, investment discipline, and continued high urgency. But they signal a wider market view that the Strait of Hormuz may never recover its pre-war dominance. If the pipeline build-out stays on track, Iranian leverage erodes dramatically, and the global supply chain rebalances toward more overland, all-weather corridors.

What the Energy Industry Needs to Watch Next

• Track concrete project milestones: UAE’s West-East pipeline (50% complete) could begin operations by early 2027; Saudi Arabia’s expanded East-West line is expected to add capacity in late 2027. Chevron has yet to announce a final investment decision on the Kirkuk–Baniyas rebuild—watch for a feasibility study outcome within months.
• Assess exposure to Hormuz-dependent crudes. Importers in Asia and Europe should model the cost of switching to pipeline-sourced barrels, factoring in new loading points (Yanbu, Fujairah, Ceyhan, Baniyas) and the premium or discount those blends may carry versus benchmark Gulf grades.
• Monitor shipping and insurance markets. A structural shift of 15-20 million b/d away from the strait will shrink the addressable market for very large crude carriers in the Gulf, potentially depressing day rates and altering demand for war-risk cover. Owners with Mediterranean-focused tonnage stand to benefit.
• Watch the Kuwait-Saudi-UAE pipeline negotiations. If Kuwait cannot secure a viable export pathway, its output may be effectively stranded, reshaping supply fundamentals for medium-sour grades. A successful deal would unlock significant new capacity to the Red Sea.
• Factor in a permanent loss of Iranian leverage. A successful pipeline build-out would fundamentally reduce the geopolitical risk premium embedded in crude prices. Traders should re-evaluate the long-term justification for a Strait of Hormuz risk spread in forward curves.