The Strait of Hormuz is unequivocally the world’s most critical oil chokepoint, a narrow waterway between Oman and Iran that serves as the sole maritime outlet for the vast majority of energy exports from the Persian Gulf.
Global Chokepoints
The Strait of Hormuz, a narrow and critical chokepoint connecting the Persian Gulf to the Arabian Sea, plays an outsized role in global energy security. Recent tensions in the region, despite no reported blockades of maritime traffic through the strait, immediately impacted energy markets, with Brent crude oil prices jumping from $69 per barrel (b) on June 12 to $74/b on June 13. This swift price reaction underscores the Strait’s paramount importance to global oil supplies.
The Significance of Chokepoints: Chokepoints are constricted sea lanes that are vital for global trade and energy flows. Any disruption, even temporary, can cause substantial supply delays and escalate shipping costs, leading to potential increases in global energy prices. While some chokepoints offer alternative routes, often at the cost of significantly longer transit times, the Strait of Hormuz stands out as having virtually no practical alternatives for the vast majority of oil and gas volumes originating from the Persian Gulf.
Dynamics of Transit Volumes: Between 2022 and 2024, volumes of crude oil and condensate transiting the Strait of Hormuz saw a decline of 1.6 million b/d. This reduction was only partially offset by a 0.5-million b/d increase in petroleum product cargoes during the same period. Several factors contributed to this decline:
- OPEC+ Production Cuts: The OPEC+ decision to voluntarily cut crude oil production multiple times starting in November 2022 directly reduced exports from major producers like Saudi Arabia, Kuwait, and the United Arab Emirates (UAE).
- Bab al-Mandeb Strait Disruptions: Disruptions in 2024 to oil flows around the Bab al-Mandeb Strait (connecting the Arabian Sea to the Red Sea) prompted Saudi Arabia’s national oil company, Aramco, to reroute some seaborne crude oil flows. Instead of transiting Hormuz, these cargoes were shifted overland through its East-West pipeline to ports on the Red Sea, thus bypassing both the Strait of Hormuz and Bab al-Mandeb. The Saudi East-West pipeline has a capacity of 5 million barrels per day, though it doesn’t typically operate at full capacity.
- Increased Regional Refining Capacity: Growing refining capacity within the Persian Gulf states increased local demand for crude oil, diverting some flows to domestic markets within the region instead of for export via the Strait.
Alternative Routes
While the Strait of Hormuz remains a critical chokepoint for global oil supplies, Saudi Arabia and the United Arab Emirates (UAE) possess some pipeline infrastructure that can partially bypass the strait, offering a degree of mitigation in the event of transit disruptions.
It’s estimated that approximately 2.6 million barrels per day (b/d) of pipeline capacity from Saudi Arabia and the UAE could be made available to circumvent the Strait of Hormuz if a supply disruption occurs. However, these pipelines typically do not operate at their full capacity under normal circumstances.
Saudi Arabia’s East-West Crude Oil Pipeline: Saudi Aramco operates the 5 million-b/d East-West crude oil pipeline, also known as Petroline. This vital pipeline stretches from the Abqaiq oil processing center near the Persian Gulf all the way to the Yanbu port on the Red Sea. In 2019, Aramco temporarily expanded the pipeline’s capacity to 7.0 million b/d by converting some natural gas liquids (NGL) pipelines to carry crude oil. Notably, in 2024, Saudi Arabia strategically pumped more crude oil through the East-West pipeline to avoid the shipping disruptions that were occurring around the Bab al-Mandeb Strait, demonstrating its utility as an alternative route.
UAE’s Fujairah Pipeline: The UAE also operates a significant pipeline that bypasses the Strait of Hormuz. This 1.8 million-b/d pipeline connects onshore oil fields to the Fujairah export terminal, which is strategically located in the Gulf of Oman, outside the Strait. In 2024, crude oil and condensate volumes originating in the UAE and traversing Hormuz were 0.4 million b/d less than in 2022. This reduction was primarily due to refinery upgrades within the UAE that allowed more heavy crude oil to be refined locally. These upgrades also facilitated an increase in exports of the UAE’s lighter crude oil grades, leading to increased utilization of the pipeline to the Fujairah export terminal. However, this increased day-to-day use of the Fujairah pipeline has limited the excess capacity available to reroute significant additional volumes around the Strait of Hormuz during a major disruption.
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Source: Energy Information Administration
