Persian Gulf Nations Pour Billions Into Pipelines Bypassing Hormuz; US Treasury Chief Says Strait Will Lose Strategic Relevance Within Two Years

Persian Gulf oil producers are embarking on an unprecedented wave of pipeline construction, fundamentally seeking to redraw the global oil transportation map. US Treasury Secretary Scott Bessent made a striking prediction in an August 8 interview: the Strait of Hormuz will become “irrelevant” within two years, with more than half of energy shipments moving through underground pipelines instead.

Bessent’s remarks are not without basis. According to Singapore’s Lianhe Zaobao, the UAE, Saudi Arabia, Kuwait, Iraq, and other Persian Gulf nations are simultaneously advancing pipeline projects designed to bypass the Strait of Hormuz, with total investment reaching billions of dollars. Once completed, these projects will fundamentally alter the geography of Middle East oil exports.

UAE: Round-the-Clock Construction at Fujairah to Double Capacity

In Fujairah, the UAE port city facing the Gulf of Oman, construction crews are laying a new crude pipeline around the clock. The pipeline runs parallel to an existing line and will carry crude from Abu Dhabi’s onshore oil fields.

The goal is to double the UAE’s Hormuz-bypass capacity to 3.6 million barrels per day. That means virtually all of Abu Dhabi’s onshore crude could be delivered directly to international tankers without transiting the Strait of Hormuz. Fujairah port sits on the Gulf of Oman, where tankers can load and sail directly into the Arabian Sea and Indian Ocean, completely avoiding the strategic chokepoint.

Saudi Arabia: Accelerating Expansion of the Cross-Peninsula East-West Pipeline

Saudi Arabia’s ambitions are even grander. State oil giant Saudi Aramco is accelerating expansion of its East-West Pipeline, with investment also in the billions of dollars.

The 1,201-kilometer pipeline, originally built in the 1980s during the Iran-Iraq War, traverses the Arabian Peninsula from eastern oil fields to the Red Sea port of Yanbu. Saudi officials are working to boost capacity by an additional 1 million to 2 million barrels per day, while also considering a second, smaller parallel pipeline for refined products.

Notably, Saudi Arabia and the UAE currently have roughly 4.7 million barrels per day of unused pipeline capacity that can bypass the Strait of Hormuz. But that figure pales in comparison to the approximately 20 million barrels per day of petroleum liquids that transit the strait.

Iraq, Kuwait, Jordan: Multiple Alternative Routes Advancing in Parallel

Kuwait is in discussions with Saudi Arabia and other Arab states to build a pipeline connecting Kuwaiti oil fields to ports on the Red Sea coast or in Oman.

According to Jordanian state television, Iraq and Jordan have also revived a long-dormant pipeline plan. If built, the pipeline could deliver up to 1 million barrels per day of crude to the Red Sea port of Aqaba. Iraq is also accelerating a plan to repair damaged pipelines to move crude from the Kirkuk fields to Syria’s Mediterranean coast.

US oil major Chevron (CVX) is participating in a feasibility study for the Haditha-Baniyas pipeline. The route extends from Iraq’s oil network at Haditha to the Syrian Mediterranean port of Baniyas. If completed, Iraqi oil producers would gain a second export option without needing to ship crude through the Persian Gulf and the Strait of Hormuz.

The Stark Reality of the Strait of Hormuz

The Strait of Hormuz is just 21 miles (about 34 kilometers) wide at its narrowest point, with Iran on one side. In 2024, roughly 20 million barrels per day of petroleum liquids transited the strait, accounting for about 20% of global oil consumption.

Yet shipping through the strait remains severely constrained by conflict. Many tankers must contend with the threat of Iranian attack drones or sail “dark” with their tracking systems disabled. At least 17 seafarers have been killed in the area. Closure of the strait is not a theoretical scenario—it has already effectively occurred.

Bessent said bluntly in the interview: “The strait will never go back to what it was, because the Iranians have used it or attempted to use it as a chokepoint. Over the next two years we will see the strait become irrelevant. It will just be another body of water. I think more than 50% to 70% of the energy that currently transits the strait will move through underground pipelines.”

Data Comparison: The Massive Gap Between Pipeline Construction and Strait Volumes

MetricFigureDaily petroleum liquids transiting Strait of Hormuz~20 million barrelsShare of global oil consumption~20%Existing spare bypass pipeline capacity (Saudi Arabia + UAE)~4.7 million bpdGap between existing capacity and strait volumes~15.3 million bpdNew pipeline capacity needed per Bessent’s forecast10–14 million bpdUAE Fujairah pipeline capacity after expansion3.6 million bpdSaudi East-West Pipeline planned capacity addition1–2 million bpd

Note: Figures compiled from the US Energy Information Administration (EIA) and public reporting.

The Real-World Challenges of the Pipeline Approach

Despite the enthusiasm, the risks facing pipeline projects cannot be ignored.

First, Bessent’s two-year timeline is highly aggressive. Large infrastructure projects typically require years—or longer—from approval and financing through construction. A pipeline crossing Iraq and Syria could face multiple threats from missiles, drones, sabotage, and political instability. Financing large-scale infrastructure in conflict zones is itself extraordinarily difficult.

Second, no single pipeline can fill the capacity gap left by the Strait of Hormuz. Bessent’s claim that 50% to 70% of strait volumes will shift to pipelines implies the need for 10 million to 14 million barrels per day of new pipeline capacity—capacity that does not currently exist. Washington’s strategy requires a network of multiple alternative routes, not reliance on any single project.

That said, Bessent’s core argument is that pipelines are permanent infrastructure, whereas missile interceptors are expendable consumables. Reports indicate that US military missile stockpiles have been depleted following the Iran conflict and years of support for Ukraine. Rebuilding those inventories takes time and money. This provides Washington with an additional rationale for favoring infrastructure development over indefinite military protection of the Strait of Hormuz.

Long-Term Market Implications

Even if the US and Iran eventually reach a ceasefire, Persian Gulf oil exporters have recognized that over-reliance on a single transit chokepoint is no longer tenable. Over the long term, these measures could also diminish Iran’s regional influence—Iran has long wielded one of the most powerful levers in the global economy through its geographic control of the Strait of Hormuz.

For Chevron investors, the Haditha-Baniyas pipeline study is not an imminent profit catalyst. The project remains in its preliminary stages and could face years of delays—or never reach construction at all. But if Washington indeed shifts from “defending Hormuz” to “bypassing Hormuz,” Chevron’s role in one of the most important alternative routes would position it with strategic relevance.

Chevron generated $33.9 billion in operating cash flow in 2025, $20.2 billion in adjusted free cash flow, and returned $27.1 billion to shareholders. The company’s financial foundation does not depend on this pipeline—it is an incremental project, not a cornerstone.

Beyond new pipelines, Persian Gulf nations are also building “physical insurance” thousands of miles away by expanding oil storage facilities in South Korea, Japan, and India. The logic is simple: if the Strait of Hormuz is blockaded, the oil has already been moved to the other side of the strait.