Maher Elhedery: Strait of Hormuz could become redundant
The Strait of Hormuz could become redundant for energy transport within the next five years, according to Maher Elhedery, as regional actors accelerate pipeline bypass projects following a US-Israeli attack on Iran in late February and subsequent Tehran-led shipping blockades.
Infrastructure Investments Target New Export Corridors
Gulf states are scaling up capital expenditures for oil and gas pipelines designed to bypass the contested chokepoint, Novinky reported. Elhedery noted that while the region holds strong recovery potential, escaping long-term reliance on the narrow maritime corridor requires major infrastructure pivots. Although specific new pathways were omitted in his latest remarks, prior strategic proposals highlight potential overland routes running from Iraq through Saudi Arabia to Oman, a pipeline linking Iraq’s Basra directly to the Turkish terminal at Ceyhan, and a prospective natural gas conduit stretching from Qatar through Saudi Arabia and Turkey into Europe. Omani ports such as Duqm and Salalah are positioned to emerge as export gates for Persian Gulf crude, circumventing the risks of the strait.
The physical routing changes build on a backdrop of severe transit friction. United States naval forces successfully enforced maritime restrictions that blocked billions of dollars in Iranian oil exports and seized millions of dollars in government cryptocurrency assets. Admiral Cooper reported that allied forces recently secured the safe passage of 400 cargo vessels moving 100 million barrels of oil through the corridor over a seven-day window. Conversely, Iranian authorities maintain that the strait remains under blockades tied to ceasefire demands.
Surging Freight Rates and Divergent Export Volumes
Global logistics costs and tanker tariffs have experienced volatility against the backdrop of ongoing regional conflict. Analysts at Goldman Sachs noted that the average global shipping rate for crude climbed above USD 20 per barrel, marking a leap from just USD 3 per barrel a year prior, as reported by Kurzy. War-risk premiums accounted for approximately USD 7 of that year-over-year increase, while ship-to-ship transfers outside the Persian Gulf contributed an extra USD 4. These heightened transit expenses threaten to compress refinery profit margins and drive up retail fuel prices across major import markets.
Despite persistent attacks on commercial vessels by Iranian forces—including a strike by a small boat against the tanker Loyalty carrying two million barrels of Iranian crude—actual export volumes from the Persian Gulf have rebounded above pre-war figures. iDNES.cz reported that combined shipments reached an average of over 24 million barrels per day in the week leading to October 18, eclipsing the pre-conflict baseline of 23.3 million barrels. Traders continue to absorb high risks driven by margins, with intermediaries moving Iranian crude capturing roughly USD 20 more per barrel than prior to the outbreak, translating to potential earnings boosts of up to USD 40 million on a fully loaded supertanker.
World Bank Projects Regional Economic Contraction
The persistent security friction continues to weigh heavily on regional economic output. Last week, the World Bank projected that the combined economies of the Middle East, North Africa, and Pakistan will contract by 1.3 percent this year due to the ongoing hostilities. Yet, institutional investors and financial planners continue to price in a recovery fueled by heavy civil engineering and pipeline development spending.
Meanwhile, the enforcement mechanisms deployed by western and allied militaries have altered trade flows, with shipping companies relying on Omani transshipment hubs and alternative overland networks.