Washington and eight Gulf capitals are weighing a USD 10 bn fund to route oil and gas around Hormuz

The Trump administration has proposed committing USD 5 bn to a new fund that would rebuild war-damaged energy infrastructure and build pipelines and terminals to move Gulf oil and gas around Hormuz, the Wall Street Journal reports. Saudi Arabia, the UAE, Qatar, Bahrain, Kuwait, Oman, Iraq, and Jordan would together contribute another USD 5 bn, bringing the proposed fund to USD 10 bn — though talks are ongoing and terms, including whether all eight governments sign on, could still change.

Behind the price tag: Iranian strikes have hit refineries, oil fields, pipelines, and gas export infrastructure across the region. The fund would need to rebuild the damaged infrastructure and develop new routes around Hormuz. Building that capacity before a peace agreement with Tehran could be premature, as new pipelines and terminals could become fresh targets for Iranian drones and missiles. “USD 10 bn is small change relative to the Gulf’s infrastructure needs. Individual LNG terminals or major pipeline expansions can run into the bns. Therefore, the fund’s main purpose is likely to be de-risking projects, attracting capital, and signaling US commitment,” John Calabrese, an assistant professor at the American University in Washington, DC, tells EnterpriseAM.

Resilience needs more than a pipe: A diversified system would have to extend beyond pipelines to storage, terminals, spare capacity, and overlapping routes, Amandeep Kaur Ahuja, MENA Geopolitical Risk Consultant & Researcher, tells EnterpriseAM. Saudi Arabia’s East-West Pipeline shows both sides of that equation: it gave Riyadh a way around Hormuz for years — until an attack this month temporarily knocked the route offline.

Avoid the single-hit failure: Hardening fixed assets has diminishing returns against precision drones and missiles, Calabrese says. A better approach may be to spread critical infrastructure so that no single strike can disable an entire system, while improving the ability to quickly repair and replace damaged equipment, he adds.

Saudi and the UAE built their workarounds, and found their limits

Case in point: The roughly 1.2k km East-West Pipeline moves crude from the Kingdom's eastern producing regions to Yanbu on the Red Sea, with a capacity of around 7 mn bbl / d. Around 4 mn bbl / d had been moving through the system before this month’s attack shut the line down and pushed Aramco toward Gulf exports and Hormuz. Aramco resumed pumping at a reduced rate on Tuesday and is preparing to restart Yanbu exports, but full restoration could still take six to eight weeks, Reuters reported.

A stronger starting point: Adnoc’s Habshan-Fujairah pipeline can move up to 1.8 mn bbl / d from Abu Dhabi’s oil fields directly to Fujairah on the Gulf of Oman, bypassing Hormuz entirely, and a parallel pipeline under construction would lift total bypass capacity to roughly 3.3 mn bbl / d by 2027. “The UAE’s pursuit to expand the Habshan pipeline is likely to be beneficial because the existing network has already proven to be successful as the additional pipeline allows the network to embody the pre-war supply of UAE oil through Hormuz,” Ahuja adds.

Not a full fix, though: Only Murban crude runs directly through the Habshan-Fujairah pipeline. Other Adnoc grades — including Upper Zakum, Umm Lulu, and Das crude — are still loaded from facilities inside Hormuz. Adnoc has therefore relied on shuttle tankers to move barrels through the strait before transferring them to larger vessels outside the Gulf, allowing buyers to collect cargoes without sending their own ships into the chokepoint.

Qatar, Kuwait, and Iraq have no equivalent escape route

Not an equal split: Kuwait and Qatar stand to gain most directly from physical infrastructure that opens up new supply and export routes, Ahuja says, while Saudi Arabia and the UAE could participate partly as financial investors in projects beyond their own borders.

The harder case: Iranian strikes knocked two of Ras Laffan’s 14 LNG trains offline, removing around 12.8 mtpa of capacity — roughly 17% of Qatar’s LNG capacity — for an expected three to five years, and the delays are now threatening parts of the North Field expansion too. Even a rebuilt Ras Laffan doesn’t solve the geography: Qatar’s LNG still has to leave through Hormuz, and QatarEnergy CEO Saad Al Kaabi has pushed back on the idea that Doha could pipe gas elsewhere and liquefy it outside the Gulf.

Kuwait’s exposure: No pipeline reaches a coast outside Hormuz — the routes through Saudi Arabia and the UAE the country discussed remain prospective — and Kuwait Petroleum Corporation has said it could restore around 70% of production within six to eight weeks of a full Hormuz reopening. “For countries like Qatar and Kuwait, increasing GCC-wide cooperation to allow for the expansion of infrastructure spending especially in energy may be the key,” Ahuja tells us.

Iraq’s stopgap: Baghdad is trucking fuel oil through Syria's Baniyas port and has authorized talks over converting that corridor into a pipeline. The planned USD 4.6 bn Basra-Haditha line, by contrast, is designed for roughly 2.25 mn bbl / d — which could depend on cooperation between Iraq and Turkey and on disputes that have disrupted flows before, Ahuja adds.

The bottom line: “In the absence of a peace process, asset vulnerability will always remain. Enhanced security measures can reduce the risk but not eliminate it, as we have seen during the Iran War. The Saudi Arabia example is a perfect look at how more assets mean more vulnerability... pipelines and stations that come up as an answer to the vulnerabilities created by this war will need to run at the same scale as the Strait of Hormuz to ensure more revenues; if not, it will always remain the preferred route of export,” Ahuja notes.