Oil pipelines around the Strait of Hormuz won't end the threat Iran poses to Middle East crude exports

• Pipeline capacity could expand to cover more than 60% of Gulf states' pre-war export volume of 23 million bpd by end of 2028, according to Goldman Sachs
• Iraq's oil production dropped over 50% to 1.9 million bpd in June from 4.2 million bpd in February due to Hormuz disruptions; U.S. is supporting rebuild of Kirkuk-Syria-Mediterranean pipeline
• Iran previously struck a Saudi pipeline pumping station in April, reducing capacity by 700,000 bpd, demonstrating vulnerability of pipeline infrastructure to attacks on terminals, storage units and pumping stations

Summary: Oil Pipelines and Iran's Threat to Middle East Crude Exports

Key Developments

Middle East oil producers are developing seven pipeline projects to bypass the Strait of Hormuz amid ongoing Iranian attacks on tanker traffic. According to Goldman Sachs, regional pipeline capacity could reach 14 million barrels per day (bpd) by end-2028, covering over 60% of the Gulf states' pre-war export volume of 23 million bpd.

Major Projects

• Iraq: Rebuilding the Kirkuk-Syria-Mediterranean pipeline with U.S. support, addressing severe export disruptions (production dropped from 4.2 million bpd in February to 1.9 million bpd in June—a 50%+ decline)
• UAE: Planning to double export capacity outside Hormuz via Port of Fujairah pipeline
• Saudi Arabia: Considering 2 million bpd expansion of its Red Sea pipeline

Critical Vulnerabilities

Analysts emphasize pipelines offer limited protection against Iran's asymmetric warfare tactics. Iran previously struck a Saudi pumping station in April, reducing capacity by 700,000 bpd. Infrastructure including loading facilities, pumping stations, and storage terminals remain exposed to low-cost attacks.

Escalating Threats

Iran and Houthi allies are threatening the Bab el-Mandeb Strait, which connects the Red Sea to global markets. Sources indicate Tehran has requested Houthis close this strait if the U.S. targets Iranian power infrastructure, potentially blocking millions of barrels diverted through Saudi Arabia's Yanbu terminal.

Market Implications

While pipelines provide geopolitical hedging, they function more as "relief valves" than Hormuz replacements. The vulnerability of critical export infrastructure like Yanbu maintains significant supply disruption risks for global oil markets, with limited alternatives for major OPEC producers like Iraq facing export bottlenecks.