The Strait of Hormuz Closure and the Reshaping of Energy Geopolitics

From December 2025 to May 2026, global energy markets moved from cautious optimism to outright crisis in a matter of months. What began as a period defined by steady demand, softening prices, and expectations of manageable supply growth was upended by geopolitical shocks that exposed just how fragile the world’s energy system remains. The closure of the Strait of Hormuz did more than disrupt shipping lanes; it redrew trade flows, revived the strategic importance of non-Gulf oil producers, and forced governments from Europe to Asia into an urgent search for alternative supply. This period has become a stark reminder that energy markets are directly shaped by geography and conflict.

Stranded Supply, Shifting Power

Disruptions in the Strait of Hormuz have rapidly reordered global energy markets, turning a regional maritime crisis into a scramble for accessible oil. Although the Gulf still holds vast reserves, much of that supply is stranded as tankers remain stalled and exports are slowed. The biggest geopolitical beneficiary is Moscow. Russian crude has become one of the few large-scale alternatives available on short notice, giving Moscow a multibillion-dollar windfall and renewed leverage despite sanctions. At the same time, the United States has expanded exports from its shale sector, sending additional cargo to Asian markets while raising prices to replace disrupted Middle Eastern supply.

Other producers are attempting to blunt the shock through workarounds rather than full substitution. Saudi Arabia has redirected some exports through its East-West Pipeline to the Red Sea port of Yanbu, allowing limited bypass of the Strait of Hormuz, though far below the volume normally moving through the strait. Meanwhile, the International Energy Agency coordinated a massive emergency release from strategic reserves to calm markets and ease price spikes. Yet these stopgap measures provide only temporary relief, underscoring how quickly short-term initiatives give way to deeper structural shifts in global supply dependence.

Oil Prices and Alliances

Rising tensions have driven sharp increases in global oil prices. U.S. WTI crude has jumped from $55 per barrel at the beginning of the year to $105 as of May 18, with a peak price above $119 on March 9. Crude prices surged after U.S.-Israeli strikes on Iran on February 28, rising from $65 to $97 overnight. Saudi Aramco also saw gains, with its first-quarter profits increasing by more than 25 percent compared to last year. Dubai crude similarly increased from $60 to $119 this year, surpassing $100 within a week of the initial strikes, and peaking at $144 on March 13 following Iran’s first major attack on the United Arab Emirates (UAE). 

The unpredictable nature of oil access has led countries to rethink their energy reliance on the Gulf. Nigeria and South Korea are the two most notable, looking to secure their access to Gulf oil by deepening partnerships with Saudi Arabia, the UAE, and Qatar. Egypt has also allied with the Gulf to restart progress on the “Moses bridge,” especially as the region has started to develop alternative trade routes that do not involve the Strait of Hormuz. Saudi Arabia has increased its security partnership interests with the United States, urging the Trump administration to reopen the Strait of Hormuz by force if necessary. 

The Duality of Energy Facilities

With the maritime route for oil transportation put into jeopardy, underground oil pipelines that span hundreds of kilometers across the Gulf states offer a workaround. The East-West Crude Oil Pipeline, also known as “Petroline,” stretches 1,200 km from the Abiquaq oil field in the Eastern Province of Saudi Arabia to the Yanbu port city on Saudi Arabia’s west coast on the Red Sea. Originally built in the 1980s following concerns that the Strait of Hormuz would be closed during the Iran-Iraq “tanker war,” the Petroline has enabled Saudi Arabia to maintain an alternative oil export route. Riyadh has rerouted exports to the Red Sea via the east-west line since Iran effectively shut down transit through the Strait of Hormuz at the start of the war.

Shipments have gradually increased in the past month, allowing Saudi Arabia to restore about 4.9 million barrels per day (bpd) of crude oil exports via the port of Yanbu, though it was not all derived from the pipeline. While exports remain far below the roughly 7 million bpd the kingdom shipped before the war, without the east-west pipeline Saudi Arabia would have no viable export route. Despite attacks targeting the Petroline on March 19, Riyadh has been able to maintain near-capacity flows of 4.6 million bpd.

While the Petroline provides substantial oil exports, it is also a significant strategic vulnerability that Iran has exploited various times since the war began. The pipeline and related infrastructure, including pumping stations, have been repeatedly targeted, even during the ceasefire. By striking the Petroline, Iran threatens one of the few viable alternatives to Hormuz transit, further amplifying its influence over Gulf energy markets. Furthermore, these strikes carry a symbolic dimension, reflecting Iran’s efforts to frame Gulf infrastructure as part of broader U.S. strategic interests. Although the pipeline is owned by Saudi Arabia, the Islamic Revolutionary Guard Corps has referred to Yanbu’s port as “oil facilities of American companies.” 

The war has underscored the economics of asymmetric warfare in the Gulf. Energy infrastructure is highly vulnerable to relatively low-cost missile and drone strikes, while defensive systems are significantly more expensive to operate. An Iranian-designed, Russian-made Shahed-136 drone costs around $30,000 to make and is manufactured from household materials. A U.S. air-based interceptor costs twice that amount, and the cheapest U.S. ground-based interceptor costs more than $250,000. Further, Iran’s short- and medium-range missiles are less than a tenth of the cost of U.S.-built Patriot interceptors. By targeting vulnerable energy infrastructure across the Gulf, Iran has shown how low-cost attacks can impose disproportionate economic costs.  

The Race Toward Energy Diversification

The Strait of Hormuz crisis reaffirmed the global importance of oil but also accelerated a broader Gulf shift toward reducing dependence on hydrocarbons through renewable energy and new export infrastructure. Rather than treating solar and wind as environmental side projects, Saudi Arabia, Oman, and the UAE are increasingly framing clean energy as a matter of economic security and geopolitical resilience. Key priorities include expanding domestic production of solar panels, wind components, and grid-scale batteries to reduce reliance on imports and create new industries. Governments are also investing heavily in storage systems that can solve the intermittency challenge that once limited solar power’s strategic value. The UAE’s launch of a massive integrated solar-and-battery facility capable of delivering continuous power, alongside Saudi plans to rapidly expand battery storage capacity, signals that renewables are no longer supplementary. Rather, they are becoming foundational to future energy planning.

This reflects a broader rethinking of how Gulf states export energy in a more volatile geopolitical environment. Alongside pipelines that bypass the Strait of Hormuz, Gulf states are developing new export models centered on electricity and hydrogen rather than oil alone. Initiatives such as the NEOM Green Hydrogen Project aim to begin exports of green hydrogen, positioning Saudi Arabia to compete in emerging low-carbon fuel markets. The Saudi-Egypt Electricity Interconnection Project also reflects growing interest in cross-border power trade. These initiatives underscore that the most important Gulf energy trend of 2026 may not be how producers respond to disruption in oil markets, but how they use the crisis to accelerate a post-oil future.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.