Iran’s diminishing leverage

History suggests that strategic leverage is strongest when it remains unused, as efforts to weaponize it often drive investment in alternatives that reduce its long-term value. Iran's use of the Strait of Hormuz follows this pattern, with Gulf states expanding infrastructure to bypass the Strait and diminish its geopolitical importance.

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There are moments in history when a nation decides to play its strongest strategic card—whether to assert its power, as with U.S. tariffs, or to defend its position, as Iran has done in the Strait of Hormuz. The immediate payoff can be significant, but the long-term consequences are often the opposite of what was intended. Strategic leverage is often strongest when it is merely possessed. Once it is wielded as a weapon, it creates powerful incentives for customers, competitors, and rivals to build alternatives.

OPEC's 1973 oil embargo remains the clearest example. In response to Western support for Israel during the Yom Kippur War, Arab oil producers cut exports and sent energy prices soaring. Yet by weaponizing their greatest source of leverage, they also galvanized the rest of the world to reduce its dependence on Middle Eastern oil. Strategic Petroleum Reserves were established, nuclear power expanded, North Sea and Alaskan production accelerated, and fuel efficiency standards tightened. The embargo demonstrated that the use of strategic leverage often plants the seeds of its own decline.

The same pattern has repeated itself elsewhere. Russia's use of natural gas exports, China's restrictions on rare earth minerals, and historical control of critical trade routes all prompted governments and businesses to invest in competing infrastructure and alternative supply chains. The lesson is consistent: the more aggressively leverage is exercised, the stronger the incentive becomes to eliminate it.

That process is already underway in the Gulf. By threatening shipping through the Strait of Hormuz, Iran may gain short-term geopolitical leverage. But it has also strengthened the economic case for bypassing the Strait altogether. While many of the projects discussed below predate the recent crisis, the renewed threat of disruption has increased both their urgency and their economic justification.

The response is emerging across four fronts: expanding Saudi Arabia's Red Sea export capacity, increasing the UAE's bypass infrastructure, developing new export corridors through Oman, and, ultimately, investing in refined product infrastructure that reduces dependence on Hormuz altogether.

Saudi’s Yanbu Route

The first example is Saudi Arabia.  They are already evaluating ways to expand exports through the Red Sea, reducing its reliance on the Strait of Hormuz. While the Kingdom's East-West Pipeline has the capacity to transport roughly 7 million barrels per day of crude from the Persian Gulf to the Red Sea, export infrastructure at the Red Sea terminal can currently only sustainably load about 4 million barrels per day, leaving substantial unused pipeline capacity. Expanding     terminal and loading facilities would allow Saudi Arabia to better utilize this existing infrastructure and further diversify its export routes. In May, Aramco Chief Amin Nasser revealed that Saudi Arabia is pursuing plans to increase Yanbu’s export capacity to 5 million barrels per day.

Saudi Arabia also retains a second cross-country pipeline that has been largely idle for more than three decades. Although it is rarely discussed as a viable alternative today, the underlying infrastructure already exists, potentially lowering both the cost and lead time required to bring additional export capacity online.

Source: Kpler

UAE’s Fujairah Route

The UAE has decided to accelerate its plans to double its pipeline export infrastructure as it aims to further reduce reliance on the Strait of Hormuz. The UAE has had a pipeline that bypasses Hormuz since 2012 when Abu Dhabi owned Adnoc opened the Habshan–Fujairah Pipeline, which can transport up to 1.8 mbd to the Port of Fujairah. This May, in response to continued disruptions in Hormuz, Adnoc decided to fast track construction of the previously undisclosed ‘West-East Pipeline’ project. The ‘West-East Pipeline’ will run parallel to the  Habshan–Fujairah pipeline and will transport a further 1.8mbd of crude. In mid may, Head of Adnoc Sultan Al-Jaber stated that the project was “almost 50% complete”, with the expectation to become operational in 2027. When complete, the Emirates would have a pipeline capacity to bypass Hormuz of 3.6mbd. In order to maximise this opportunity, the UAE is also accelerating Fujairah’s crude export capacity expansion, aiming to increase it to 4 mbd by 2027.

Source: Kpler

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