Experts:

• Matthew Thoelke, VP Olefins EMEA
• William Chen, VP Olefins APAC
• Mariana Santos Moreira, Thought Leadership Director
• Carlo Barrasa, VP Energy and Feedstocks
• Sarah Fowler, Senior Analyst International Economy and International Organisations, Oxford Analytica

The 2026 Hormuz Crisis is Reshaping Global Energy Markets

The structural foundations of the global energy market began a seismic and potentially irreversible transformation on 28 February 2026. This date serves as the start of the effective closure of the Strait of Hormuz, a maritime chokepoint of such singular importance that its neutralization immediately invalidated decades of supply-chain assumptions.
Geopolitical events over the last three months have greatly impacted the forward view for energy, with profound implications for both the short- and long-term energy outlook. Government responses to the energy trilemma—security, sustainability, and affordability—will vary by country, but energy security will remain a priority for all nations.
Many outcomes are possible, though according to Dow Jones Energy, the future of energy is expected to be shaped by the following three themes.

1. More polarization, less collaboration: In the past few years, the world has endured a pandemic, global trade fractures, major regional conflicts, widespread geopolitical ideological shifts, and in 2026 the unprecedented closure of the most important oil trade route. As this increasingly polarized geopolitical environment persists, trade will become less efficient, with an increasing drive toward protectionism and reduced collaboration on emission targets and clean energy development.
2. Entrenched hydrocarbon demand: Hydrocarbon-based fuels and products cannot be easily replaced and will take decades to substitute with other energy sources. The crisis in the Middle East is not expected to create enough urgency to replace hydrocarbon value chains, as the default path of least resistance will be building contingencies for a future crisis.
3. Supply diversification and transport optionality: The closure of the Strait of Hormuz has prompted broader discussions about supply risk and flow assurance. Countries dependent on Middle Eastern energy supply will seek to reduce this reliance, by pursuing resource exploration and production in other regions to serve these countries. Middle Eastern countries will respond by heavily investing in midstream infrastructure—including pipelines and ports—to limit dependence on the strait and develop alternate delivery routes.

The crisis in the Middle East has rapidly evolved into the most significant supply disruption in the history of the modern petroleum age. Approximately 20% of the world’s oil and liquefied natural gas (LNG) consumption became trapped in the Gulf. The region accounts for approximately 25 million barrels per day (b/d) of the world’s oil supply, meaning the closure disrupted just over 10 million b/d of crude oil supply and 4 million b/d of refining capacity.

Saudi Arabia typically exports more than 7 million b/d of oil, and the United Arab Emirates (UAE) usually exports 3 million b/d of oil. Even if pipelines moving oil west from the Gulf to the Red Sea are full, the closure of the strait removes approximately 13% of global supply.

For many Asian importers, the crisis is existential, as the region relies on the strait for approximately 60% of its oil inflows. The sudden cessation of maritime traffic has left major industrial bases facing fuel and petrochemical feedstock shortages and extreme price volatility. The immediate financial and operational ramifications for the private sector have been unprecedented in scale.

This environment has sparked a global scramble for alternate supply, as the world recognizes that the old energy map—centered on a single, vulnerable chokepoint—is no longer viable. A Memorandum of Understanding (MOU) was signed in mid-June, with hopes that ongoing negotiations would lead to a longer-lasting agreement. The ceasefire was revoked on 8 July 2026. While reports of the strait’s reopening have calmed market volatility, logistics disruptions will remain for months, and risks to commercial hulls are too significant for standard insurance underwriting. This crisis is no longer a temporary shipping bottleneck: it is a fundamental structural break in the 2026 oil market, requiring a total reassessment of global energy security and the geographic distribution of production capital.

The Physical and Reputational Damage to the Gulf Be Permanent

The physical and reputational damage to the Middle Eastern energy sector will persist for the remainder of the decade. The toll on infrastructure across Gulf countries is extensive, requiring a massive mobilization of capital and engineering expertise.

The operational reality of recovery is far more complex than a simple reconstruction timeline. The IEA has provided a granular view of this challenge, suggesting that while 50% of production capacity might be restored within two weeks of a ceasefire and another 30% within six weeks, the final one-fifth of Gulf production will take months or years to bring back online. This permanent loss of 20% of the region’s output is a critical metric for global markets to absorb.

Furthermore, recovery is fundamentally hampered by a severe maintenance backlog, a critical shortage of spare parts due to overstretched global supply chains, and the significant loss of evacuated foreign personnel whose expertise is vital for operating complex upstream and downstream facilities.

Beyond the physical wreckage, the reputational damage to the region represents a structural devaluation of the low-risk status once enjoyed by Gulf Cooperation Council (GCC) states. For decades, the region marketed itself as a stable, secure provider of high-volume hydrocarbons. Iran’s successful closure of the strait shattered that perception, transforming what was once a theoretical threat used for diplomatic leverage into a proven tactic. Consequently, there is now a permanent risk premium on every barrel of oil produced in the Persian Gulf. The specter of a subsequent closure will likely continue to weigh on investment and remain a driving factor in freight and insurance costs for the foreseeable future.

Gulf Cooperation Focus on Hormux Bypass Strategies 

The realization that the Strait of Hormuz can be neutralized as a global energy chokepoint has catalyzed a fundamental shift in Gulf nations’ energy policies. These countries are pivoting to a model that not only prioritizes production, but also infrastructure redundancy, treating export routes as a matter of national survival

to ensure that crude can reach global markets even when the primary maritime route is blocked. This realignment involves the rapid expansion of overland pipelines and the development of new export hubs that bypass the strait entirely.

Urgency has reemerged among Gulf nations to accelerate a long-planned railroad project to connect countries in the region. Furthermore, interest has revived in historical pipeline routes that have been defunct for decades due to political disagreements. These include the Kirkuk-Banias and Trans-Arabian pipelines, the latter of which once delivered Saudi crude to Sidon in Lebanon. These projects face immense diplomatic and security hurdles, but even cost-impeditive fallback options from the past are being viewed as essential investments in future energy security.

Gulf producers are increasingly marketing ports that sit beyond the strait, like Salalah and Sohar in Oman, as critical oil storage and export hubs, shifting the focus of the region’s logistics map to the Gulf of Oman and the Arabian Sea. The leading possibility was proposed in the 1970s and revived by Oman in 2021: a pipeline running from Saudi oil fields through Oman to an export point on Oman’s southern coast. Given the need to access Asia and insecurities in the Red and Black seas, this would bypass the need for Hormuz or Suez transit.

In Iraq, the revival of the Kirkuk-Ceyhan project arose from an agreement between Erbil and Baghdad in March; expansion would give the former more control over more Iraqi crude exports. However, Iraq’s pipeline plans have typically faced financial, political, and security challenges: Iraq claims that repairs to the 1.6 million b/d section of the Iraq-Turkey Pipeline (ITP) from Kirkuk to Fish-Khabour on the Turkish border are close to completion. However, market sources expect the reopening to be months out. Furthermore, volumes would initially be restricted to the limited amount of crude produced in federal northern oilfields.

The Iraqi government has established a commission to investigate construction of a 685-kilometer pipeline from Basra to Al Haditha in western Iraq. This project would have 2.25 million b/d of capacity and would allow Iraqi crude to bypass the strait and reach global markets via Ceyhan in Turkey, Banias in Syria, and Aqaba in Jordan. In April, the Ministry of Oil was authorized to invite companies to bid for the contract to install the link at an estimated cost of $4.6 billion, of which $1.5 billion was allocated in the 2026 budget. The scheme would reportedly be partly funded through the $10 billion oil-for-projects credit line with China.

Saudi Arabia has aggressively moved to operationalize its contingency infrastructure and is running its East-West Pipeline at full capacity of approximately 7 million b/d compared with 2 million b/d preconflict. This massive overland shift has forced Saudi Arabia to prioritize the rapid upgrade of export facilities at the Red Sea port of Yanbu. For reference, Saudi Arabia built the East-West Pipeline in response to the waterborne threat posed by the Iran–Iraq War in the 1980s.

UAE policy has also profoundly shifted, punctuated by its recent, historic exit from OPEC+, which is inextricably linked to the nation’s new export strategy. Abu Dhabi is accelerating plans for a second Habshan-Fujairah pipeline, with completion planned for 2027. This project aims to double the export capacity of the strategic Fujairah port, which sits outside the Strait of Hormuz on the Gulf of Oman. By expanding these lines, the UAE will circumvent the strait and challenge Saudi Arabia’s historical position as the region’s dominant participant by providing a more direct route to the open ocean. Proposals have also been floated for a pipeline carrying crude from Hamriya Port in Sharjah (just west of the strait) to Fujairah.

Qatar has no other realistic export options. The conflict exposed an acute vulnerability: the nation has only one domestic hub at Ras Laffan to process gas into LNG for overseas delivery, which must transit via the Strait of Hormuz. Ras Laffan’s precautionary shutdown early in the conflict proved prescient in late March when an Iranian missile attack inactivated 17% of the complex’s capacity for three to five years.

In mid-April, the Turkish Energy minister revived a proposal for a gas pipeline running from Qatar through Saudi Arabia, Jordan, and Syria to Turkey, allowing onward export to Europe. However, the enormous cost, Turkey and Qatar’s volatile relations with Riyadh, and the uncertainty of long-term demand from Europe make it highly unlikely the project will proceed.

Syria’s position as a transit country and modest oil producer may well resume, to the benefit of its struggling economy. Cooperation in the Gulf and neighboring countries is clearly shifting to bypass alternatives. However, this transition is fraught with risk, as inland pipelines remain vulnerable to drone attacks, and any export route to Asia via the Red Sea remains dependent on secure passage through the Bab al-Mandab chokepoint. The strategic reality is that the era of a single, efficient maritime route is over, replaced by a fragmented system of high-cost, high-redundancy corridors that prioritize security over economic optimization.

**Originally written in July 2026.

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