AMMAN, Jordan — The U.S. has announced new economic sanctions aimed at loosening Iran's hold on the Strait of Hormuz while counting on Middle East oil producers to quickly build new pipelines bypassing the key shipping route. But energy analysts say replacing shipping capacity through new infrastructure anytime soon is unlikely. The result is expected to be continued higher prices for consumers.
"What we are going to see over the next two years — the strait is going to become irrelevant," Treasury Secretary Scott Bessent told an NBC affiliate earlier this month, adding that 50% to 70% of energy products normally shipped through the Strait of Hormuz would be transported through underground pipelines. "It is going to become just another body of water." Energy analysts and the international organization representing some of the biggest oil producing countries warn that the strait will continue to be essential for shipping into the near future. The United Arab Emirates says it expects a $3 billion pipeline expansion to its port of Fujairah to come on line next year.
But other major projects, including a larger Saudi pipeline expansion, are likely to take several more years, according to the International Energy Agency, whose members are oil producing countries including the United States. "And even when these big projects finish, the amount of oil that will still need to pass through the Strait for total Gulf exports to return to pre-war levels could exceed 10 million barrels per day — around half of prewar levels," the IEA's senior oil market analyst, Rebecca Schulz, tells NPR. The IAE says the sharp drop in shipping since the U.S. and Israel attacked Iran in February has been the biggest energy supply disruption on record.
"I think that we have to accept that this crisis in the Strait of Hormuz, the constraints on exports are going to be a somewhat permanent feature for the next few years," said David Goldwyn, a former U.S. State Department special envoy. "The dynamics of the conflict, which are that Iran wants to get paid for exports, is not going to change.
The U.S. inability to achieve a military outcome that would force freedom of navigation in the strait also seems very unlikely." "Irrelevant is way too strong and overstated," says analyst Robert McNally, referring to Bessent's prediction on the Strait of Hormuz. "When we talk about energy flows, the Strait of Hormuz is the most relevant chokepoint on the planet. Even if regional producers are able to build pipelines and options to direct flows around Hormuz, the benefit, and there will be a benefit to that, will not make Hormuz irrelevant," says McNally, who served as senior director for international energy on then-President George W.
Bush's National Security Council. McNally noted that Iran has repeatedly demonstrated that it is able to attack redirected routes and locations of expanded terminals. Most oil and liquefied natural gas (LNG) infrastructure in and around the Gulf was designed to use the Strait of Hormuz for export.
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