Gulf oil producers are pouring billions of dollars into new pipeline projects designed to move crude oil outside the Strait of Hormuz, the narrow waterway that carries about a fifth of the world's petroleum. The investments aim to reduce the region's vulnerability to potential disruptions at the chokepoint, which Iran has threatened to close in past conflicts.
Why the Strait of Hormuz matters
The strait connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. Roughly 20 million barrels of oil pass through it daily, making it the most important oil transit chokepoint in the world. Any closure — whether from military action, geopolitical tension, or accidents — would send global oil prices soaring. The new pipelines offer an alternative route, allowing crude to be exported directly to the Arabian Sea or the Red Sea, bypassing the strait entirely.
The pipeline projects underway
Several major projects are in development or already operational. The UAE's Abu Dhabi Crude Oil Pipeline, which runs from Habshan to Fujairah on the Gulf of Oman, has a capacity of 1.5 million barrels per day. Saudi Arabia's Petroline, also known as the East-West Pipeline, can move 5 million barrels per day from its eastern oil fields to the Red Sea port of Yanbu. Both countries are expanding these systems. Iraq is also building a new pipeline to Turkey that would bypass the strait, though that project faces political and security hurdles. Together, these investments total tens of billions of dollars.
What the prediction market says about oil prices
One prediction market currently gives a 7.2% probability that West Texas Intermediate crude oil will reach $110 per barrel in July 2026. That's a low but non-trivial chance, reflecting the market's view that a major supply disruption — possibly linked to the Strait of Hormuz — is a tail risk. If the new pipelines are completed and operational by then, they could reduce that risk by providing alternative export capacity. But the projects take years to build, and the region's politics remain volatile.
What comes next
The next major milestone is the completion of Saudi Arabia's pipeline expansion, expected to add another 1 million barrels per day of capacity by 2025. The UAE is also pushing ahead with its own upgrades. Whether these projects will be enough to fully insulate global markets from a Hormuz closure remains an open question. The prediction market's 7.2% figure suggests traders aren't betting on a crisis — but they aren't ruling one out either.
