Tehran, as a key player in the Persian Gulf energy war, has increased its ability to threaten the flow of oil and gas through regional routes, especially the Strait of Hormuz. In the first month of the war, Saudi Arabia's oil exports fell by more than one-third, and the UAE's exports dropped by over 50%, while exports from Kuwait and Iraq were nearly halted. Additionally, liquefied gas exports from Qatar and the UAE were completely cut off.
Impact of Iran's Threats on Shipping and Insurance
Direct attacks or increased risk of war have led shipping companies to refrain from dispatching their vessels, and insurance companies have either not provided coverage or demanded much higher rates. These experiences have prompted Gulf Arab countries to redesign their energy infrastructure. Saudi Arabia and the UAE have quickly established pipelines to bypass the Strait of Hormuz, and at least seven new projects for transferring oil to the Red Sea, the Sea of Oman, or the Mediterranean are in design or execution.
Read more: Saeed Tavakoli: Optimizing Energy Consumption Ensures the Sustainability of the Gas Network
Forecast of Increased Export Capacity
Goldman Sachs estimates that these projects could add nearly four million barrels per day to export capacity outside the Strait of Hormuz by the end of 2027 and more than seven million barrels per day by the end of 2028. However, Daniel Byman and Alden Ness in their analyses have emphasized that the end of the war will not necessarily mean the end of threats against Persian Gulf energy, and Iran is likely to try to maintain its ability to disrupt oil and gas production and transportation.
Moreover, Tehran may use the threat of disruption in energy exports as leverage to pressure regional countries. These threats could become more complex due to changes in the political and economic situation of neighboring countries. Particularly given Iran's different relationships with regional countries, the threats may be more severe for Saudi Arabia and the UAE, while Iraq is recognized as a potential partner.
Prolonged Cycle and Vulnerability of Infrastructure
The energy infrastructure of the Persian Gulf is significantly interconnected, and damage to one link can affect the entire network. This is especially important in Gulf countries where production, processing, and exports are concentrated in a limited number of large facilities. An attack on major facilities like the Abqaiq complex in Saudi Arabia could have deeper impacts on the global energy market.
The experience of Houthi attacks on Saudi Arabia's energy infrastructure has shown that drone attacks can pressure key targets. Therefore, Iran and its allies are likely to employ a combination of widespread and more precise attacks on remote facilities. These threats may lead to a kind of prolonged cycle where attack, repair, and re-attack become part of the reality of energy activity in the region.
Read more: The Puzzle of the Strait of Hormuz and Its Impact on the Global Oil Market · Iran Continues Its Attacks and Targets the LR2 Lipisi Oil Tanker in the Strait of Hormuz
