Strait of Hormuz at Risk of Becoming a ‘Wasting Asset’ as Gulf States and Global Buyers Seek Alternatives
Global buyers and Gulf producers are accelerating moves to lessen dependence on the Strait of Hormuz after Iran’s recent use of the chokepoint, raising questions about the waterway’s long-term strategic value.
Iran’s assertive control of the Strait of Hormuz has underscored its ability to disrupt roughly one-fifth of pre-conflict global oil flows and prompted exporters and importers to pursue costly alternatives. The term “Strait of Hormuz” has re-emerged across policy circles as governments weigh pipeline projects, stockpiles and supply-chain diversification to reduce vulnerability.
Iran’s Leverage Over the Strait of Hormuz
Iran’s capacity to interdict shipping and threaten closure of the Strait of Hormuz provided it with tangible strategic leverage during recent regional confrontations. Analysts say that visible demonstrations of this power — including attacks on commercial vessels and naval posturing — made the risk immediate for energy markets and maritime insurers. Tehran has also signalled intent to monetise transit, with plans to charge ships traversing the waterway, reinforcing both its leverage and the perception of the strait as a source of state revenue.
Global Supply Chains Move to Reduce Hormuz Exposure
Countries long dependent on uninterrupted passage through the strait are accelerating diversification of supply chains to insulate themselves from future disruptions. Importers are expanding strategic oil reserves, sourcing crude from non-Middle Eastern producers and pursuing renewable energy investments to lower reliance on seaborne hydrocarbon flows. Supply-chain experts warn that these shifts are costly and will take time, but they argue that a single period of sustained disruption can be sufficient to change long-term procurement strategies.
UAE and Regional Pipeline Expansion to Bypass the Chokepoint
Regional action is already underway to reduce passage through the Strait of Hormuz, with Gulf producers fast-tracking pipeline projects and export infrastructure. The United Arab Emirates, which operates an existing pipeline that bypasses the strait, has committed to expanding overland capacity and fast-tracking new lines to double its ability to export without relying on the waterway by 2027. Iraq and other Gulf states are also developing overland routes and alternative port options to ensure exports can continue even if maritime transit becomes hazardous.
Industrial Commodities Face Tougher Diversification Challenges
While oil and gas can be rerouted or substituted more readily over time, certain industrial materials present greater hurdles for diversification. Commodities such as naphtha, helium and fertilizer rely on specialised production facilities and concentrated sources of feedstock and expertise. Building new manufacturing capacity or relocating production outside the region requires heavy investment, long lead times and large energy inputs, meaning some supply chains will remain exposed to Hormuz-related risks for years.
Economic Trade-offs of Decoupling From Hormuz Flows
Reducing dependence on the strait entails economic costs that will be felt by consumers and industry alike. Higher transportation expenses, increased insurance premiums and the capital costs of alternative infrastructure will likely push up fuel and shipping prices in the near term. Policymakers now face a trade-off: absorb higher costs to earn geopolitical insurance, or accept continued exposure to a strategically valuable but potentially volatile chokepoint. Many governments appear to be choosing the former, judging that the insurance premium is preferable to future blackmail.
Strategic Implications for Global Energy Markets
If countries follow through on diversification, the strategic centrality of the Strait of Hormuz could diminish over time, transforming it from a pivotal chokepoint into a less critical route. That outcome would be a paradox for Iran: the more it demonstrates willingness to use the strait as leverage, the more others will invest to avoid that vulnerability. Yet the pace and extent of change will vary by commodity and by country, preserving some degree of Hormuz-dependent flows even as new corridors and stockpiles grow.
The future of the Strait of Hormuz now depends on a delicate balance of deterrence, diplomacy and infrastructure investment, and the decisions made by importers and producers in the coming years will determine whether the waterway remains a strategic linchpin or gradually becomes a less indispensable route for global trade.
