Hormuz bypass pipelines: limits and risks

The Strait of Hormuz is often described as either open or closed. Oil markets do not work in such a clean binary.

Cargoes can be delayed, selectively escorted, rerouted through pipelines, loaded from storage outside the strait or transferred between ships. Each route can soften a disruption. None can replace the full flow that normally passes through Hormuz.

That distinction mattered during the 2026 shock and will matter again whenever headlines imply that one pipeline or one ceasefire has solved the problem.

The scale of the gap

The International Energy Agency estimates that nearly 20 million barrels a day of oil moved through Hormuz in 2025, roughly one-quarter of global seaborne oil trade. The US Energy Information Administration gives a similar estimate of 20.9 million barrels a day in the first half of 2025.

Available bypass capacity is much smaller. The IEA estimates that Saudi Arabia and the United Arab Emirates can redirect about 3.5 million to 5.5 million barrels a day through operational crude pipelines, depending on operating conditions and export capacity at the receiving ports.

The arithmetic is the starting point: bypass routes can preserve several million barrels a day, but not the whole system.

Route one: Saudi Arabia to the Red Sea

Saudi Arabia’s East–West pipeline connects oil facilities near the Gulf with Yanbu on the Red Sea. Its design capacity is about 5 million barrels a day. Saudi Aramco has reported an expanded capability of 7 million barrels a day, although the IEA notes that sustained flows at that level have not been fully tested.

Before the 2026 disruption, the IEA estimated that roughly 2 million barrels a day were already using the system. That left an estimated 3 million to 5 million barrels a day of spare potential, subject to operational limits and the ability of west-coast terminals to load the extra crude.

A pipeline’s nameplate capacity is therefore not the same as immediately available export capacity. Pumps, storage, crude grades, terminal berths and tanker scheduling all have to work together.

Route two: Abu Dhabi to Fujairah

The UAE’s Abu Dhabi Crude Oil Pipeline runs from Habshan to Fujairah on the Gulf of Oman, outside the Strait of Hormuz. Its reported capacity is about 1.8 million barrels a day. The IEA estimated that around 1.1 million barrels a day were already moving through it in early 2026, leaving up to 700,000 barrels a day of additional room. The EIA’s UAE analysis independently identifies the operating pipeline and its 1.8 million-barrel-a-day capacity.

Fujairah also has storage, refining and ship-to-ship transfer infrastructure. That makes it a valuable outlet and logistics hub. It does not make the barrels invulnerable.

Concentrating more cargoes, tankers and transfers around one port creates a different bottleneck. Weather, berth congestion, insurance restrictions, a security incident or damage to storage and loading infrastructure could reduce the value of the bypass. An attack on Fujairah is a risk scenario, not an event to assume without evidence.

Ship-to-ship transfers rearrange logistics; they do not create capacity

Ship-to-ship transfers can move crude from a vessel that cannot complete a route to another vessel positioned outside the most constrained area. They can also draw on floating storage. This is useful during disruption, but it should not be counted as if it were a new source of production.

The same barrel can appear in pipeline, storage, transfer and shipping statistics at different stages. Adding every visible movement risks double-counting. Analysts need to distinguish production, exports, transit, storage withdrawals and cargo transfers.

What the 2026 recovery showed

The IEA’s July 2026 Oil Market Report said an interim ceasefire supported a strong recovery in June. Total Gulf oil exports, including bypass volumes, rose by 6.5 million barrels a day to 16.1 million barrels a day. That was a large improvement but still below the pre-war average of 24 million barrels a day cited by the agency.

The recovery also included oil released from floating and onshore storage. It was not all fresh production. Meanwhile, refinery operations and product markets remained tighter than the crude headline suggested.

That is why a falling crude price does not automatically mean the physical system has normalised. Crude transit, field production, refinery runs, product exports and inventories can recover at different speeds.

The LNG problem has fewer escape routes

Oil pipelines receive most of the attention, but Hormuz is also critical for liquefied natural gas. The IEA estimates that Qatar and the UAE account for about 19 per cent of global LNG exports and that almost all of those exports normally transit the strait.

An oil bypass pipeline does not reroute LNG. A disruption can therefore ease for crude while remaining serious for Asian gas buyers, power markets and LNG shipping.

What Australian investors should monitor

Actual tanker flows through Hormuz, not ship counts without cargo and time definitions
Throughput and spare capacity on the Saudi and UAE bypass pipelines
Loading rates, congestion and operating notices at Yanbu and Fujairah
War-risk insurance premiums, tanker freight and voyage cancellations
Onshore and floating inventories, including whether exports are storage releases or new production
Refinery runs, diesel and jet-fuel cracks, and product-export recovery
Brent time spreads and physical differentials rather than the front-month price alone
Qatari and UAE LNG loadings and Asian gas prices

For Australian portfolios, the transmission can run through energy producers, airlines, freight, inflation expectations, interest rates and the Australian dollar. The direction is not automatic. A temporary crude spike followed by demand destruction can produce a different result from a prolonged product shortage. This is the same reason a broader market-regime framework separates the initial shock from the conditions that determine its portfolio effect.

What would weaken or change the view

The view would weaken if loaded tanker volumes through Hormuz recovered consistently, pipeline and terminal operations remained stable, war-risk costs declined, refineries restarted and inventories stopped drawing. Conditions that would change the view also include sustained evidence that Yanbu and Fujairah could handle flows near the top of their reported ranges without congestion, showing that the practical buffer is larger than conservative estimates imply.

Disruption risk would rise if flows fell again, if Yanbu or Fujairah became constrained, if storage releases masked weak fresh production, or if refined products and LNG failed to recover alongside crude. Evidence of an attack or operational outage at a bypass hub would be materially different from speculation that one might occur.

Hormuz is a network, not a switch

Hormuz is a network of shipping lanes, pipelines, terminals, storage tanks, refineries and insurance contracts.

Saudi Arabia and the UAE can redirect meaningful volumes, and those routes reduced the scale of the 2026 shock. They could not replace the entire strait. Fujairah and Yanbu are buffers, not substitutes for normal regional trade.

The useful question is therefore not simply whether Hormuz is open. It is how many loaded barrels and LNG cargoes are moving, by which route, at what cost, and whether the rest of the energy system is recovering with them.

Hormuz is not binary: what bypass pipelines can and cannot solve