Iran overplaying its hand on Hormuz? A new game has just begun in West Asia oil scene

Let’s be honest. Iran has US President Donald Trump in a headlock over the Strait of Hormuz. The White House is fighting to reopen a waterway that wasn’t closed before the conflict started. But Tehran risks overplaying its hand: If it continues to squeeze, it will lose strategic leverage — not immediately, but over the next five years or so as its neighbors build more bypass routes.

Don’t take my word for it. Listen to what Iranian officials say themselves. “The strait is valuable while the traffic through it increases day by day, not when it decreases,” Mohammad Bagher Ghalibaf, the Iranian parliament speaker and top negotiator, told state television earlier this month. “We must not turn the strait against itself.”

And yet, that’s precisely what the Islamic Republic is doing. By striking oil tankers off the coast of Oman, it has convinced every one of the Persian Gulf states, as well as oil importers including deep-pocketed nations such as China and Japan, that the only way to guarantee future oil flows is to invest billions of dollars in new pipeline capacity.


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Sure, Iran will win some short-term battles; the Islamic Revolutionary Guard Corps. can prevent ships from crossing the strait, maybe even for an extended period. If so, oil prices will increase, piling economic and political pressure on Trump. Only the use of the US strategic petroleum reserves, alongside China reducing its oil purchases dramatically, will stop the energy market from exploding. But over the longer term, Iran’s ability to hold the global economy to ransom will fade as transit overground displaces seaborne passage via Hormuz — which will happen relatively quickly.

Before the war started, Hormuz carried about 20% of the world’s oil, split between 15 million barrels a day of crude and another five million barrels of petroleum-refined products. Iran itself accounted for about three million barrels a day of crude and refined products, leaving 17 million barrels from its neighbors traversing the strait. Of that, Saudi Arabia and the United Arab Emirates have already re-routed about five million barrels a day via pre-existing pipelines.

So the race is on to find alternative routes for the remaining 12 million daily barrels needing to avoid the waterway. Oil pipelines are straightforward engineering projects, and can be built at what feels like lightning speed compared with other infrastructure. Consider, for example, the so-called Tapline, a 1,640-kilometer (1,019-mile) conduit that once ran from Saudi Arabia to Lebanon, crossing on the way Jordan and Syria. It was built in just three-and-a-half years and was completed in 1950. In the 1980s, other major regional pipelines, including the two phases of the Iraq-Saudi pipeline, or IPSA , were built in less than four years.

But politics, rather than steel welding and pumping capacity, pose the main obstacle to construction. Projects become pieces in a game of Middle East diplomacy the moment they need to cross an international border — and only Riyadh and Abu Dhabi can build new pipelines within their own territory. Everyone else must cross at least one border, if not more, to reach the sea.

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For decades, the region has struggled to build — and then operate — regional culverts. The rusted remnants of old channels, built from the 1950s to the 1990s and since abandoned, bear witness to the numerous failed projects to ship oil from the Middle East bypassing Hormuz. Tapline is itself one of those examples. But the ongoing battle between the US and Iran, alongside the end of the Syrian civil conflict, have shifted regional dynamics. Today, Damascus and Riyadh can do business, as can Baghdad and Ankara. What once looked impossible appears increasingly feasible.

Abu Dhabi is already moving ahead; once its half-built new pipeline, with a capacity of about a 1.5 million barrels a day, enters operation by the end of 2027, it will reduce the amount of oil that needs to cross Hormuz to about 10.5 million barrels. Moreover, the UAE is mulling quickly building a third pipeline that would further narrow the shortfall to about 9 million barrels.

The Saudis will do the same. In private, the kingdom is already drawing plans for new bypass projects, expanding the capacity of its vast East-West pipeline and its two Red Sea oil terminals, in Yanbu and Al Muajjiz. Saudi plans remain vague, but the kingdom can easily add another 2 million to 4 million barrels a day of overland capacity before 2030 if Riyadh gives the go-ahead soon. Saudi Arabia can act, too, as a channel for Kuwait; the smaller emirate, sandwiched at the very end of the Persian Gulf, is already in talks with its neighbor about circumvention plans. In total, the daily Hormuz gap could be reduced to five million barrels. That’s still quite a lot, but far more manageable than the current status quo.

And then there’s Iraq. Baghdad is looking north, via Turkey, and west, via Syria, to export its oil via the Mediterranean Sea. Unfortunately, that’s in the backyard of Europe, a declining market for oil, rather than Asia, where demand is still growing. Still, it’s better than nothing. Washington, keen to re-integrate Damascus into the global economy after it lifted sanctions, is pressing Baghdad to consider routes across Syria. Today, those projects may seem unlikely — but don’t underestimate the combined power of diplomacy and money to dissolve frictions.

Oil pipelines aren’t a failsafe workaround: The conduits are themselves vulnerable to attack, as are the ports at which they culminate. But the current war has demonstrated that they’re far more resilient than naysayers had argued. Tehran’s efforts, for example, have failed to disrupt the Saudi and UAE ones.

The War of Hormuz could last a while yet. Iran may win several battles, but by 2030, the strait won’t be the major oil chokepoint that it is today, as millions of barrels take evasive action. Ghalibaf knows this — hence his framing of the waterway as a valuable asset so long as it’s a vital route for the region’s output. It’s unclear, however, whether his brothers-in-arms at the IRGC have got the message.