Gulf oil exporters race for routes around Hormuz after Trump toll threat

Gulf oil exporters are speeding up efforts to move crude without relying on the Strait of Hormuz after President Donald Trump threatened a 20% fee on cargo crossing the waterway. For everyday investors, the risk is straightforward: when a major oil route gets more expensive or less reliable, energy prices and inflation-sensitive stocks can feel the pressure.

The Strait of Hormuz is a chokepoint, meaning a narrow passage that handles a large share of global trade flows. Renewed U.S.-Iran tensions and shipping disruptions have pushed Saudi Arabia and the United Arab Emirates to use backup routes that keep oil moving when tankers face delays or danger near the Gulf.

The UAE is considering a new port and container terminal on its east coast, outside the strait, according to a Financial Times report that cited unnamed people familiar with the matter. The report said Dubai-based DP World has discussed developing a port in Fujairah and adding a terminal at the emirate’s existing harbor. DP World declined to comment when contacted by CNBC.

Ahmed bin Sulayem, chief executive of the Dubai Multi Commodities Centre, told CNBC’s “Squawk Box Asia” that the reported UAE plans look like both a short-term response and a longer-term strategy. He said shipping lines are unlikely to put much focus on Hormuz until conditions there become safer.

Saudi Arabia leans on its Red Sea route

Saudi Arabia has been sending about 4 million barrels a day through its East-West pipeline, according to Andy Lipow, president of Lipow Oil Associates. The pipeline, also known as Petroline, runs roughly 750 miles from Abqaiq on Saudi Arabia’s Gulf side to Yanbu on the Red Sea.

The system has an estimated design capacity of 7 million barrels per day after recent expansions. Lipow’s data showed Saudi crude being moved west to Yanbu, where tankers can load and sail through the Red Sea rather than exit through Hormuz.

Bob McNally, president of Rapidan Energy Group, called Saudi Arabia’s ability to route more oil through Yanbu a major success. He also told CNBC that the UAE, with help from the U.S. military, appears to be returning toward pre-war levels.

Backup routes still carry risk. Ships leaving Yanbu must pass through the Bab el-Mandeb Strait, another narrow waterway where Houthi attacks could threaten traffic. Lipow said any effort to stop those vessels could take several million barrels a day out of the market.

The UAE uses shuttle tankers

The UAE has also chartered tankers to move crude from inside the Strait of Hormuz to waters outside it, analysts said. Lipow told CNBC that the oil can then be transferred to larger vessels for trips to Asia. That transfer process, known as lightering, lets cargo move between ships when a direct voyage is less practical.

Carole Nakhle, CEO of Crystol Energy, told CNBC that the UAE has moved faster than many regional peers in announcing alternatives to Hormuz. She said reducing reliance on the strait could also give the UAE more leverage in any future arrangement with Iran and weaken some of Tehran’s regional influence.

Most Gulf exporters remain exposed

The International Energy Agency says Saudi Arabia and the UAE are the only Gulf producers with operating crude pipelines that can bypass the Strait of Hormuz. The IEA estimates they have 3.5 million to 5.5 million barrels a day of available capacity.

Other exporters, including Iraq, Kuwait, Qatar, Bahrain and Iran, still depend heavily on the waterway for oil shipments, according to the IEA. Lipow said Saudi Arabia, Kuwait and Iraq could eventually have to reverse recent production increases if storage fills and empty tankers cannot reach export terminals.

Adam Posen, president of the Peterson Institute for International Economics, told CNBC that building enough alternatives would take time. He said countries may need another 18 to 24 months to add pipelines, shipping routes and other workarounds that reduce dependence on Hormuz.

This story draws on original reporting from CNBC.