The situation
As of July 26, Gulf producers are advancing or discussing at least seven pipeline projects toward the Red Sea, Gulf of Oman and Mediterranean in response to continuing disruption and elevated security risk in the Strait of Hormuz. Saudi Arabia’s East-West pipeline to Yanbu and the UAE’s Fujairah route provide the main existing oil bypasses, but both were reported near full capacity, limiting immediate diversion volumes.
The UAE is accelerating a parallel line to Fujairah intended to add more than 1.2 million barrels per day, though it was only roughly half complete and its reported completion target remains in 2027. Iraq is considering longer-term routes from Basra towards Turkey, Syria and Jordan. These projects expand future options but do not restore normal Hormuz export capacity or provide an alternative for Qatari LNG shipments that formerly transited the strait.
Why it matters
The response is a structural energy-security adaptation to a chokepoint that carried roughly 15 million barrels per day of Persian Gulf oil before the conflict. With existing bypass infrastructure already heavily used, exporters remain exposed to constrained physical export capacity until new pipelines, ports and associated shipping arrangements are completed.
Diversion also transfers rather than removes risk. Red Sea routes remain vulnerable to attacks, while some Mediterranean options would lengthen voyages to Asian markets and raise transport costs. The most immediate exposure is therefore concentrated among Gulf oil producers, refiners and traders dependent on reliable export flows, while LNG supply remains particularly constrained by the absence of comparable pipeline alternatives.
What changed
Reporting on July 23-24 identified accelerated work, planning and discussion around multiple Gulf oil-export bypass projects, while confirming that the principal existing Saudi and UAE alternatives were already near full capacity.
The assessment
Current judgement
Pipeline diversification can reduce future Hormuz exposure, but it offers limited near-term relief and leaves regional exports exposed to security risks on alternative corridors.
Key assumption
The judgement depends on the reported near-full utilisation of the Saudi East-West and UAE Fujairah routes continuing to constrain immediately available diversion capacity.
Impacts
Energy
Gulf producers are expanding oil-export alternatives because Hormuz disruption persists, but the principal Saudi and UAE bypass routes are near full capacity and the main UAE expansion is unfinished. LNG flows remain without an equivalent pipeline workaround.
Trade & Supply Chains
Additional pipelines may improve long-term export resilience, but new routes require construction, port capacity and secure onward shipping. Red Sea insecurity and longer Mediterranean voyages can add operational and transport constraints for buyers, particularly in Asia.
Military & Security
Redirecting exports away from Hormuz does not eliminate route risk because Red Sea-linked infrastructure and tanker movements remain exposed to Houthi threats and reported attacks.
Full edition assessment · Energy
Energy conditions are volatile and tightening around Gulf export resilience. Persistent disruption in the Strait of Hormuz is driving producers to rely on Saudi and UAE bypass systems that are reported near full use, while major additional capacity remains unfinished. At the same time, claimed Houthi launches toward Saudi facilities near the Red Sea raise risk to the Yanbu corridor that supports Saudi diversification away from Hormuz.
The immediate exposure is concentrated in Gulf crude and LNG export logistics rather than a confirmed broad production outage. There is no verified damage to the Saudi sites, loss of Saudi exports, or equivalent bypass route for Qatari LNG; this distinction leaves crude-routing, LNG availability, tanker operations and freight risk more exposed than upstream output itself.
Moderate confidence · Worsening · Rising
Limited crude-export redundancy
Persistent Hormuz disruption is accelerating Gulf pipeline diversification, but the established Saudi route to Yanbu and the UAE route to Fujairah are reported near capacity while the main UAE expansion is not expected to provide near-term relief.
Gulf producers, crude traders, refiners reliant on Gulf grades, and tanker operators face the greatest exposure to constrained diversion capacity and potentially higher transport costs.
Signal to watchConfirmed spare capacity, commissioning progress on the parallel Fujairah line, or a sustained increase in export volumes through existing bypass routes would clarify whether physical resilience is improving.
Red Sea diversification carries its own security risk
Claimed targeting of Saudi energy facilities and threats to Saudi-linked shipping add security risk to the Red Sea corridor that underpins part of Saudi Arabia's alternative export routing.
Shipping insurance, tanker scheduling and Red Sea-linked crude exports are more immediately exposed than Saudi production, because damage or export interruption has not been verified.
Signal to watchSaudi authorities' confirmation of facility damage, export disruption, or a verified sustained reduction in Saudi-linked traffic through Bab al-Mandab would indicate a material escalation.
Full edition assessment · Trade & Supply Chains
Trade and supply-chain conditions are becoming more complex through new, differentiated U.S. tariffs on covered imports from 60 economies and China's immediate restriction of China-origin dual-use transfers to 14 named EU entities. Both actions create concrete compliance, classification and sourcing requirements, but the evidence does not yet show broad production stoppages or large-scale trade diversion.
Physical-route risk remains concentrated in Gulf and Red Sea energy logistics. South China Sea confrontations have increased operational danger for Philippine government fisheries missions near Scarborough Shoal, but do not establish disruption to commercial shipping.
Moderate confidence · Worsening · Rising
Customs and sourcing complexity increases
The U.S. shift from a temporary blanket levy to origin- and product-specific Section 301 treatment requires importers to determine exposure through tariff classification, origin, applicable duty rates and exemptions.
Importers sourcing from covered economies face near-term compliance costs and margin uncertainty, while reported exemptions for oil, gas, fertilizer and qualifying USMCA goods may limit exposure for some flows.
Signal to watchPublished customs guidance, exemption decisions, and evidence of changes in import orders or sourcing patterns will show whether the new tariff schedule is producing material trade diversion.
Targeted dual-use controls test European inputs
China's order requires relevant China-origin dual-use transfers to the 14 listed EU recipients to stop unless an exceptional application is approved, creating a direct supply-screening issue for those entities and their suppliers.
The greatest immediate exposure is among named industrial, research and defence-adjacent recipients with dependencies on controlled China-origin goods, software or technology; broader EU-China trade disruption is not established.
Signal to watchExceptional export approvals, company disclosures of delayed inputs, or verified production adjustments by listed entities would establish the practical severity of the controls.
Full edition assessment · Military & Security
Military and maritime-security risks are rising in two geographically concentrated theatres. In the Red Sea, the exchange between Houthi forces and the Saudi-led coalition has moved from reported attacks on Saudi-linked tankers to unverified claims of launches toward Saudi energy sites. Near Scarborough Shoal, a second consecutive day of Chinese water-cannon use and close interception against Philippine government vessels has increased the risk of collision or injury.
Neither development establishes a new armed conflict or verified sustained interruption of commercial navigation. The central near-term risk is miscalculation around government and coast-guard activity, alongside escalation that converts maritime threats into physical damage to energy or shipping infrastructure.
Moderate confidence · Volatile · Volatile
Saudi-Yemen escalation reaches energy-linked targets
Houthi claims of missile and drone launches toward facilities near Yanbu and Jizan followed coalition strikes in Hodeida, broadening the apparent target set from Saudi-linked vessels to energy infrastructure.
Saudi Red Sea ports, energy facilities and associated shipping face elevated precautionary and insurance risk, although official confirmation of impacts, casualties or export disruption is absent.
Signal to watchVerified facility damage, a confirmed interruption in Saudi oil exports, or sustained attacks on Saudi-linked vessels would mark a material escalation.
Coast-guard coercion heightens accident risk
Chinese water-cannon use and interception manoeuvres against Philippine fisheries-support vessels near Scarborough Shoal have continued over consecutive days, sustaining the risk of collision or injury during government operations.
Philippine coast-guard and fisheries missions near the shoal are directly exposed; there is no evidence in the current reporting of a commercial-shipping disruption or armed clash.
Signal to watchA collision, injuries, the deployment of additional state vessels, or an announced bilateral operating arrangement would clarify whether the encounter pattern is escalating or stabilising.
What to watch
- Does the UAE bring the parallel Fujairah pipeline into service on a confirmed timetable and with usable export capacity above existing routes?
- Do verified attacks or security restrictions further disrupt Red Sea pipeline-linked exports or tanker movements?
Evidence and uncertainty
Moderate confidence. Moderate confidence. 2 retained references from 2 reporting origins (Reuters, AP News). Claim-level independent corroboration has not been established. Confidence concerns the evidence for the reported development, not the probability of an outlook.
Useful context
Strait of Hormuz
A narrow waterway connecting the Persian Gulf to the Gulf of Oman and a principal route for Gulf oil and LNG exports.
Continuing disruption there is driving investment in alternative oil-export infrastructure.
Fujairah
A UAE export hub on the Gulf of Oman, outside the Strait of Hormuz.
It is the destination for UAE pipeline capacity intended to bypass Hormuz.
East-West pipeline
Saudi Arabia’s crude pipeline system linking eastern oil facilities with Yanbu on the Red Sea.
It is one of the principal existing routes for Saudi oil exports that bypasses Hormuz.
Geographic context
- 01Strait of Hormuz (region)
- 02Yanbu, Saudi Arabia (city)
- 03Fujairah, UAE (city)