Investment in alternative oil pipelines and logistics could render the Strait of Hormuz largely obsolete within the next five years, according to Georges Elhendery, Group Chief Executive Officer of HSBC. Speaking at the HSBC Future Forum in Dubai on Wednesday, Elhendery emphasized how recent disruptions caused by the ongoing conflict involving Iran have accelerated efforts by Gulf countries to diversify their energy export routes.
The Strait of Hormuz, a critical maritime chokepoint, previously accounted for about 20% of the world’s oil and liquefied natural gas shipments. However, the region has faced increased volatility since the outbreak of hostilities in late February, prompting Gulf producers to seek more resilient infrastructure options to mitigate the risk of supply interruptions.
“Elhendery noted that despite hopes for a resolution to the conflict, the strategic importance of Hormuz is likely to diminish substantially within five years,” according to remarks reported from the event. He added that the Gulf is expected to recover and continue economic growth, supported by significant investment in energy transportation and broader infrastructure.
One major initiative highlighted is Saudi Arabia’s plan to expand its East-West oil pipeline capacity from 7 million barrels per day to 10 million barrels per day over the next two to three years. This pipeline enables Saudi crude exports to bypass the Strait of Hormuz by connecting directly to terminals on the Red Sea, thereby enhancing supply route security, Energy Minister Prince Abdulaziz Bin Salman announced recently at the World Petroleum Congress in Riyadh.
Other Gulf states are pursuing similar diversification strategies. Kuwait is developing oil storage facilities outside the Middle East to bolster flexibility, while Iraq is considering reactivating a pipeline through Syria to facilitate direct access to Mediterranean ports.
This strategic shift coincides with an anticipated surge in regional infrastructure development. Data cited by HSBC from Dubai-based construction analytics provider MEED indicates that the Middle East, North Africa, and Turkey collectively have a $1.4 trillion pipeline of planned and proposed infrastructure projects. Of this total, $872 billion pertains to discrete individual projects, underscoring the scale of forthcoming investments.
Despite the ongoing conflict and associated risks, a recent HSBC survey involving more than 1,600 business leaders and over 800 global institutional investors reflected sustained confidence in the Gulf’s attractiveness as an investment destination. This outlook suggests the region’s economic fundamentals remain robust amid geopolitical uncertainties.
Overall, the combination of expanded pipeline capacity, new export facilities, and broad infrastructure investment is shaping a future in which the strategic dependence on the Strait of Hormuz is significantly reduced, altering the landscape of global energy trade within the next half-decade.