Two Solutions for the Strait of Hormuz Straitjacket

The Strait of Hormuz is considered one of the world’s most vital geographic “chokepoints,” places where blockage can disrupt the world economy and create serious security issues.  As we have seen over the past month, with 20% of global oil and 20-25% of liquified natural gas supply being blocked from reaching dependent markets in the EU and Asia.  The blockage, in turn, is starting a cascading effect of disruptions, such as effects on fertiliser supply chains and helium needed to produce semiconductors which are supporting the AI boom.  Even with the limited damage so far produced, energy markets are likely to be disrupted for months or more, further sparking inflationary pressures and pushing us towards a recession.

If Iran and the US resume their conflict, things will only get worse as Iran has promised to retaliate upon Gulf energy targets.  Even if they agree upon a ceasefire, preliminary estimates suggest at least $270 billion in damage to the Iranian economy already.  The outcome of the war is an Iran even more motivated to reach for the security of a nuclear weapon, and more importantly, its newfound power to close the Strait.  Essentially, it has discovered asymmetric power from its “mosquito Navy,” including small fast boats with automatic weapons, RPGs, and minelaying equipment, disguised as civilian vessels and/or hidden in caverns along its coast, alongside underground and mobile missile launchers and cheap drones (both land- and sea-based), can create enough security concerns that even the world’s most powerful military is unable to stop.  Thus, it is no surprise that Iran’s 10 point peace plan includes control of the Strait and the ability to collect tolls from it.

The Workaround

The curious thing about the Strait problem is that there are clear alternatives.  While 20-30% more expensive than tankers, pipelines offer a way to reduce Iran’s leverage on the world’s oil supply.  As seen in the map below, there are a number of possible routes by which one can transport oil from the Gulf states to the EU or the Mediterranean for shipment around the world.  As has been well-discussed, the Saudi Arabia East-West Pipeline (7 m. capacity) and the UAE Abu Dhabi Crude Oil Pipeline (1.1 m.) bypass the Strait, but their total capacity falls far short of the almost 15 m. barrels/day exported from the Strait of Hormuz.  Moreover, they are close to the Strait and thus have been subject to drone attacks from Iran, and they prioritise domestic oil, leaving exporters Bahrain, Qatar, Kuwait and Iraq out in the cold.

Examining a tailored map of the region below reveals there are other bypass possibilities through pipelines from Iraq into Turkey or Syria to be loaded onto tankers in the Mediterranean.

Source: Author adapted from the US Library of Congress, Accessed, Apr. 20, 2026.

In fact, there are already pipelines in Iraq from Kirkuk into Turkey, and from Azerbaijan to Turkey, and then from Turkey to the EU.  This means most of the infrastructure is already built.  Yes, it means cutting in the Kurds in northern Iraq and the Turks on exports, but these partners will also have an interest in expanding and securing the flow.  If the Turks are already selling oil from the Kurds, they can’t object to expanding such trade.

Alternatively, one could go through Western Iraq and into Syria or Israel.  This would create potential security concerns as it goes through former ISIS-held territory.  In the past, it would have also meant dealing with the Assad regime, but all sanctions on Syria have been lifted and it now appears to be stabilising.  In fact, there is a now dormant pipeline from Kirkuk into the Syrian port of Baniyas on the Mediterranean.  It would require some effort to help the Syrian army secure the Western part of the country, or reconsider enlisting the Syrian Kurds who helped to defeat ISIS to provide security.  Reviving the pipeline from Iraq to Syria has garnered recent interest from the Iraqi Government.   Revenue generation in Western Iraq could be used to reduce political disquiet, similar to creating shared interests with the Kurds. Under the current circumstances, it’s unlikely any Arab country would want to build a pipeline to Israel, but one could allow the Gulf States to export directly to the EU via Jordan, thus bypassing Western Iraq and Syria.

The Long-term Solution to Oil Geopolitics – Renewables

In the long-run, as oil prices rise from the crisis, we are reminded again how closely the Western and world economies have been intertwined with the Middle East, for over a century now.  Entanglement with the Middle East is linked to both economic and security crises, from the OPEC oil crisis of the early 1970s to the fall of the Shah in 1979 to the disastrous invasions of Iraq and Afghanistan in the early 2000s.  The best solution for our oil addiction is to kick the habit.  In fact, based on the need to respond to climate change, prices for renewables are now competitive with fossil fuels, as seen in the graph below.

Estimated Costs of Energy By Source in 2025 (low and high range, $/MWh)

Source: Author from Lazard Frères

If wind, geothermal and solar are competitive with fossil fuels without destroying the climate, what are we waiting for?  There are three main obstacles that could be solved a lot more easily than Middle East security quagmires.  The first is energy storage.  We need to improve battery life so that storage can last longer for when the sun is not shining or the wind blowing.  Integration of markets can help to diversify sources or energy, modulate peak demand, and link to hydropower reservoirs, which are effectively batteries.  There is nothing to stop the world, though, from increasing the percentage of renewables and then keeping natural gas or nuclear as a 20% backup until we create a battery system.  Moreover, AI and data centres are going to need even more electricity, so all new supplies should be renewables.  It’s reassuring that EVs are now cheaper over a lifetime than gas cars, and without the pollution.  The second is the incredible lobbying power of the fossil fuel companies, who continue to receive political and financial support from the world, even as they are creating huge increasing costs in the form of climate change.  There is no comparable counterweight to their power.  The third is “carbon lock in,” or the fact that our systems are all built on fossil fuels, from our petrol stations to our agricultural systems to plastics.  Despite what they say, people are reluctant to change, and it takes time to change systems.  This is where policy has to play a leadership role.  Yet change is inevitably coming in the form of “long-term demand destruction,” for fossil fuels as prolonged high prices and shortages are matched by stunning declines in renewable energy costs.   Worldwide, already, about 25% of new car sales (up from 4% in 2020) are now EVs, with major recent spikes in sales of EVs and renewable energy in the EU and East/Southeast Asia leading the way, a trend that will accelerate.

Given the periodic crises we’ve experience in our energy systems from our reliance on fossil fuels, and the fact that we now have solutions, the question we are left with is where is the policy leadership in Canada and the US?