Hormuz Alternative Routes: Amid Middle East Warfare, the Global Oil Market Depends on These Two Pipelines for "Lifeline"!

As the Strait of Hormuz is blocked, the lifeline of the global oil market now depends on two pipelines. These are currently the only significant alternative routes for Middle Eastern crude oil to enter the international market, and their operation status directly affects global energy supply.

The two pipelines are: the Saudi Arabia east-west oil pipeline, transporting crude westward to the Red Sea port of Yanbu; and the UAE Habshan-Fujairah pipeline, bypassing the Strait of Hormuz to the port of Fujairah.

Amin Nasser, CEO of Saudi Aramco, said Tuesday that this is the biggest crisis the region’s oil and gas industry has faced so far. The company expects to push the capacity of the east-west pipeline to a maximum of 7 million barrels per day within a few days, with about 5 million barrels flowing to international markets and the rest supplied to domestic refineries.

According to IEA data, the UAE’s Habshan-Fujairah pipeline has a maximum capacity of about 1.8 million barrels per day, operating at around 1.1 million barrels per day before the conflict.

However, this “lifeline” also introduces new vulnerabilities. The Saudi east-west pipeline has never operated at full capacity over a long period. Analysts warn that Iran may shift targets from the strait to land-based pipelines and ports; Fujairah port was damaged last week in an unsuccessful drone attack.

Oil tanker traffic through the Strait of Hormuz remains extremely low, with at least 25 tankers rerouted to the Red Sea.

Earlier, Wall Street Insights reported that, according to Morgan Stanley’s daily tracking on March 10, only 3 crude and refined oil tankers passed through the Strait of Hormuz that day, with zero LNG and LPG ships transiting—compared to a normal level of about 35 ships, indicating extremely low traffic.

However, Goldman Sachs’ report differs from Morgan Stanley’s data. The Wall Street Journal cites Goldman Sachs, stating that oil flow through the Strait slightly increased on Monday, with vessel numbers recovering to 20% of pre-war daily averages.

Goldman Sachs warns that data may fluctuate, and that ships often turn off transponders to avoid detection, making traffic tracking difficult.

Meanwhile, Saudi Aramco’s east-west pipeline is nearing its maximum capacity of 7 million barrels per day, and exports from Fujairah have surged by 45% in a single month, with 25 tankers rerouted to the Red Sea port of Yanbu for redeployment.

These two pipelines are considered the “only scalable alternatives,” but they can only mitigate, not fully fill, the supply gap.

In the event of a blockage at the Strait of Hormuz, the Saudi east-west pipeline and the UAE Habshan-Fujairah pipeline are currently the only two routes capable of allowing “significant scale” crude oil to bypass the strait and enter the international market.

However, these pipelines cannot cover all the cut-off flows. IEA notes that Saudi Aramco still has about 800,000 barrels per day of refined products that must pass through the strait, which cannot be rerouted, along with crude oil from Kuwait, Iraq, and Bahrain that remains stranded.

Sparta Commodities estimates that even with full operation, about 10 million barrels of crude oil could be trapped in the Persian Gulf daily. Neil Crosby of Sparta said, “We’ve basically only solved half the problem.”

Saudi Arabia’s east-west pipeline is racing toward a capacity of 7 million barrels per day. Yanbu’s loading volume has reached record levels.

The pipeline is the core of alternative supply. Amin Nasser said Saudi Aramco expects to push this 746-mile-long pipeline to a maximum of 7 million barrels daily, with about 2 million barrels supplied to Saudi refineries and roughly 5 million barrels available for export.

IEA states that this scale is comparable to most of Saudi Arabia’s pre-war exports through the Strait of Hormuz.

But it also puts infrastructure under stress. IEA emphasizes that the pipeline has never operated at full capacity for extended periods. According to LSEG data, Yanbu’s shipping volume averaged 2.2 million barrels daily in the first nine days of March, significantly up from 1.1 million barrels daily in February.

Kpler data suggests that in March, the number of ships loading could reach at least 40, potentially boosting exports to over 4 million barrels per day. Traders say Yanbu’s handling capacity exceeds 4.5 million barrels daily, but historically, it rarely exceeds 2.5 million barrels.

Historical background: Steel arteries born for war

The construction of the Saudi east-west pipeline was originally a response to the Persian Gulf crisis. In the early 1980s, the Iran-Iraq War threatened shipping safety in the Persian Gulf, prompting Saudi Arabia to build this pipeline across the Arabian Peninsula to ensure oil could bypass the war zone and reach the Red Sea directly.

According to internal Saudi Aramco communications from 1983, over 7,000 workers completed the project in four years. The project was overseen mainly by Mobil’s division, with the first crude transported in 1981. To build supporting natural gas pipelines simultaneously, the construction team used 2,000 tons of explosives to carve a trench across the Arabian Peninsula.

The pipeline was designed to bring Saudi exports closer to Western markets, but today, most Saudi crude exports have shifted eastward to Asia.

There was also an unfulfilled expansion opportunity in history. In early 1990, Iraq and Saudi Arabia jointly built a large pipeline to Yanbu, planning to directly export Iraqi crude to the Red Sea and expand export capacity. However, just seven months later, Saddam Hussein invaded Kuwait, and the pipeline was shelved, never put into operation.

Fujairah channel offers “second outlet,” but freight costs and price differences are reshaping trading logic

The UAE’s Habshan-Fujairah pipeline transports Abu Dhabi crude to the port of Fujairah in Oman Bay, becoming another route to bypass the Strait of Hormuz.

IEA data shows that this pipeline’s maximum capacity is about 1.8 million barrels per day, operating at around 1.1 million barrels before the conflict.

Companies are also feeling cost pressures. Petrobras states that Saudi Arabia has fulfilled its supply commitments via the pipeline, and its CEO says the main issue now is rising shipping costs.

The scarcity of alternative crude is reflected in price structures. One signal is that Omani crude, which can be shipped outside the strait, is trading at a premium to the “Dubai” grade, which is shipped from Fateh port inside the strait and difficult to reroute.

Security risks spill outside the strait: pipelines, ports, and Red Sea routes become new “soft spots”

Alternative routes are not “safe corridors.” Market participants worry that as these two pipelines become more critical, they may also become more direct targets.

Analysts warn that there are few factors preventing Tehran from shifting targets to Saudi and UAE pipelines.

Port-level risks have already emerged. Last week, Fujairah port was damaged in an unsuccessful drone attack, prompting some fuel suppliers to withdraw from contracts.

Risks also exist in the Red Sea. In 2024, the Houthi rebels, allied with Iran, launched dozens of attacks on commercial ships. Although they have not resumed attacks during the current war, the threat remains. The UK Maritime Security Agency, Ambrey, advises ships with links to the US and Israel to avoid the Red Sea.

A March 5 article by Wall Street Insights reports that France, Italy, and Greece are coordinating military deployments to ensure freedom of navigation in the Red Sea, highlighting its strategic importance amid complex regional military dynamics.

Implications for current oil prices

Against the backdrop of the Strait of Hormuz blockage, the pace of loading at Yanbu and Fujairah, the stable operation of the east-west and Habshan-Fujairah pipelines, and security incidents targeting pipelines and ports are collectively influencing whether the “supply gap” will widen or be contained.

For investors, attention has shifted from single-strait passage risks to the capacity realization of alternative routes, regional price differentials, freight rate changes, and signals of new facility damages.

Risk warning and disclaimer

Market risks are present; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their circumstances. Investment is at your own risk.