Oil Seeks New Routes as Gulf States Diversify Away From Strait of Hormuz

The Strait of Hormuz, a vital waterway connecting the Persian Gulf to the Gulf of Oman, plays a critical role in global energy security, handling roughly a quarter of the world's seaborne oil trade. In 2025, an estimated 20 million barrels of crude oil and oil products transited this narrow passage daily, alongside nearly a fifth of the global liquefied natural gas trade. Asia, in particular, relies heavily on this route, with approximately 80 percent of the oil passing through Hormuz destined for countries like India, China, Japan, and South Korea.

This heavy reliance grants Iran significant leverage, as any escalation of tensions could potentially disrupt shipping traffic. While international maritime law generally ensures freedom of transit, the physical security of the strait remains a concern, with threats like mines, missiles, drones, and fast boats capable of rendering the passage perilous for shipping companies.

Experts warn that the economic consequences of a blockade in the Strait of Hormuz could be immense. Benjamin Triebe notes that disruptions have already led to significant oil price hikes, impacting economies worldwide. In response, Gulf states are actively pursuing strategies to lessen their vulnerability to the strait. Decades-long contingency planning has always considered Iran's potential to close the strait as a worst-case scenario.

Ambitious projects are underway to circumvent the strait. One striking concept involves constructing a new channel, with futuristic designs illustrating a potential canal linking Dubai to Fujairah. Although a similar idea was discussed in 2008 with an estimated cost of $200 billion, the drive to secure alternative routes persists. Smaller-scale initiatives are also being explored, such as a proposal from 2026 focusing on the Musandam peninsula, an Omani exclave situated at the entrance to the Strait of Hormuz, aiming to develop new shipping routes and reduce dependence on this critical chokepoint.

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The damage caused by a blockade of the Strait of Hormuz can be enormous. And we are experiencing this in the spring and summer of this year. The prices for oil have risen sharply, but also the prices for all products related to crude oil. And the increased costs burden the economies everywhere. The states around the Gulf are naturally trying to find alternatives. Because for decades it has always been considered the worst case that Iran could one day block the Strait of Hormuz.