By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panel discusses the potential diversification of oil routing away from the Hormuz Strait, with mixed views on the timeline and impact on oil prices and geopolitics. While some panelists see this as a long-term bullish factor for energy security, others caution about the timing of infrastructure projects and the risk of supply glut. The shadow fleet of sanctioned barrels is also a significant factor, potentially undermining OPEC+ pricing power and widening the Brent-WTI spread.
Risk: Execution delays and financing issues for pipeline projects, which could keep prices more volatile and maintain the Brent-WTI relationship closer to today's levels.
Opportunity: Permanent diversification of oil routes, which could strengthen resilience and reduce single-point risk for prices in the long term.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Post-War Oil Trade Could Look Nothing Like It Did Before Hormuz
Irina Slav
5 min read
Persian Gulf oil exporters are scrambling to reroute their crude from ports to pipelines to keep the world running and keep their oil money flowing and fueling their economies. Sanction waivers abound. Venezuela’s oil output has shot up to 1.25 million barrels daily. The world of energy after the end of the war in the Middle East will be a very different one from what we’ve become accustomed to over the last five years.
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When the United States and Israel first fired on Iran, the overwhelming assumption was that first, Iran would never close the Strait of Hormuz, and two, after the closure became a fact, that it would only last for a few days, maybe a couple of weeks tops. Then, when it became abundantly clear that there is no expiry date on the Strait closure, oil exporters finally started making contingency plans.
News about pipeline plans in the Persian Gulf includes the UAE, which eyes an operational pipeline to the port of Fujairah by next year, demonstrating just how urgent the alternative route is to one of the largest oil exporters in the Middle East. The UAE’s exit from OPEC highlighted the urgency as well, even though it was seen as a pivot to more energy policy independence. It was, but it can also be interpreted as a move to make sure the oil flows.
For years, the UAE has been working to boost its crude oil production capacity to 5 million barrels per day by 2027. To that end, the UAE had consistently demanded that it should be allowed in the OPEC and OPEC+ production deals to use more of its growing spare capacity—and it has indeed been allowed to do so. The country, alongside Saudi Arabia, is one of the few in the region—and the world—that held spare production capacity before the Middle East war began.
Saudi Arabia itself is a case in point: the kingdom has been using its East-West pipeline to bypass the Hormuz blockade, becoming an example of actual contingency planning and oil flow diversification in case of trouble in the neighborhood. Now, even Iraq is talking about boosting its pipeline capacity up to threefold—and doing it within three months.
Crude oil production from Iraq’s southern fields has plunged by 70% since the start of the U.S. and Israeli war on Iran, with the average production at 1.3 million barrels per day, compared with 4.3 million bpd before the war began. This makes OPEC’s number-two perhaps the most severely affected oil producer in the Gulf, because it is almost entirely reliant on the Strait of Hormuz for its exports.
“The legacy of the crisis will result in the construction of infrastructure to bypass the Strait of Hormuz,” Hamad Hussain, commodities economist at Capital Economics, told the Wall Street Journal. “The genie is out of the bottle given that the longstanding threat of Iran effectively closing the strait has now materialized.”
Many observers seem to believe that even when the war ends, one way or another, the oil landscape will change for good, with exporters investing in what the Wall Street Journal described as “an export network with multiple exits”—a real-life demonstration of the principle of distributing eggs to multiple baskets. As summed up by ADNOC’s head and the UAE’s energy minister, Sultan al-Jaber, “Energy security is no longer just about your ability to continue to produce. “It is about routes, access, storage and redundancy.”
Meanwhile, as warnings about a severe oil supply crunch multiply and get louder, some see relief on the horizon. Kpler, specifically, recently described a scenario in which Venezuelan, Iranian, and Russian oil all return to the market in greater volumes—which is already happening.
Venezuela, Kpler reported, is already producing and exporting 1.25 million barrels daily after the United States toppled the Maduro government and lifted sanctions so American companies could return to the country. This could rise to 1.5 million barrels daily by the end of the year, with Kpler analyst Naveen Das noting that since Venezuela is producing extra-heavy, high-sulfur crude, its recovering production would be in direct competition with Iranian and Russian heavy sour barrels, pressuring prices.
A forecast about weaker prices in less than a year has become an exception rather than the rule it was at the start of this year, before the war began, but it is a possibility. While there is no sign of any reconsideration of EU sanctions on Russian energy, the U.S. has issued waivers on crude and has extended these more than once, and this, per Kpler’s Das, “eliminated the psychological and compliance barriers for Asian buyers.”
As for Iran, the Kpler analysts see the chances of a peace deal rise in sync with the pressure on the U.S. economy resulting from the crisis-fueled energy price inflation. Essentially, the argument appears to be that the U.S. administration would have to do something to reverse the price trends, and that something will very likely involve sanction relief on Iranian crude. Again, it is worth noting this is still a distant prospect as President Trump appears intent on staying the current course.
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Four leading AI models discuss this article
"Diversification improves resilience but does not guarantee faster supply or lower prices; the real test is timing and cost to build the capacity."
Article argues post-war oil routing will diversify away from Hormuz, boosting UAE, Saudi, Iraqi pipelines and Venezuelan output. That strengthens resilience and could reduce single-point risk for prices, and the relief from waivers and sanctions may support Asian demand. But the strongest counterpoint is timing risk: real-world pipeline capacity, storage, and cross-border agreements take years, not months, so the market might see only gradual diversification. Demand risk remains: if a global recession or accelerated energy transition weakens demand, the supposed ‘multiple exits’ could suppress prices; sanctions policy and geopolitics remain volatile, meaning any sudden flare-up could re-impose risk premia.
The strongest countercase is that even with diversifying routes, physical bottlenecks, high bypass costs, and political risk could keep liquidity tight and volatility elevated; and the article understates how sanctions dynamics and demand weakness could undermine any price relief.
"The permanent closure of the Strait of Hormuz necessitates a multi-year, high-cost transition to land-based export infrastructure that will structurally inflate global oil price floors."
The structural shift toward 'Hormuz-bypass' infrastructure is a massive capital expenditure cycle that permanently alters the risk premium for Middle Eastern crude. While the article highlights the UAE’s Fujairah expansion and Saudi pipeline utilization as bullish for supply security, it ignores the fiscal strain on these petrostates. Diverting billions into redundant pipelines while simultaneously managing lower export volumes—especially for Iraq—creates a dangerous fiscal cliff. If the market prices in a permanent 'security premium' for barrels that avoid the Strait, we could see a long-term divergence between Brent and WTI pricing. I am skeptical that Venezuelan output can bridge the gap, as their heavy crude requires significant refinery upgrades that aren't happening overnight.
The thesis assumes that infrastructure projects in the Middle East will be completed on schedule, ignoring the reality that regional instability often leads to indefinite delays and massive cost overruns.
"The article conflates bullish long-term infrastructure diversification with bearish near-term supply normalization, masking the real risk: oil prices could fall sharply even as geopolitical risk remains elevated, crushing energy equity valuations that have priced in sustained scarcity."
The article conflates two separate dynamics: (1) real infrastructure investment to bypass Hormuz, which is genuinely bullish for energy security long-term, and (2) near-term supply relief from Venezuela/Iran sanctions relief, which is bearish for oil prices. The timing mismatch matters enormously. UAE's Fujairah pipeline won't be operational until 2025; Iraq's tripled capacity in 3 months is fantasy. Meanwhile, Venezuelan production at 1.25M bpd is already priced in, and Iranian sanction relief remains speculative under Trump. The article treats these as a unified bullish narrative when they're actually contradictory: better infrastructure = lower geopolitical premium; more supply = lower prices. Neither helps energy stocks uniformly.
If Hormuz closure persists and infrastructure projects slip (common in the Gulf), the geopolitical premium on oil could sustain $90+ WTI for 18+ months, making energy majors' cash flows exceptional regardless of price direction—the article's infrastructure optimism may underestimate execution risk and overestimate how quickly alternatives matter.
"Extra supply from Venezuela and rerouted Gulf crude will cap oil prices below $70 within a year despite ongoing Hormuz risks."
The article highlights Gulf states accelerating pipeline builds like UAE's Fujairah link and Iraq's tripling capacity to bypass Hormuz, alongside Venezuela's output hitting 1.25 million bpd post-sanctions lift. This diversification plus potential Iranian and Russian barrels suggests a structural supply glut emerging within 12 months. However, the piece underplays execution timelines—most pipelines require 18-36 months—and Venezuela's extra-heavy crude faces refinery constraints that limit quick displacement of lighter grades. Asian buyers gaining sanction waivers could absorb some volumes, but persistent Middle East tensions risk fresh disruptions before redundancy materializes.
Pipeline projects and Venezuelan ramps have repeatedly slipped timelines by years due to capital and technical hurdles, while any U.S. sanction relief on Iran remains politically remote under current policy.
"Execution and financing constraints could throttle Gulf bypass projects, muting near-term price relief and leaving geopolitical risk premiums in place rather than a durable supply-driven re-rating."
Gemini's view on a permanent 'security premium' hinges on steady capex and growth in supply, but the real risk is financing and execution. Gulf states face fiscal strain and debt dynamics that could throttle or delay pipeline projects, especially amid weaker export volumes. If projects slip, the anticipated diversification won't arrive on schedule, keeping prices more volatile and the Brent-WTI relationship closer to today than the long-run divergence you imply.
"The proliferation of a 'shadow fleet' for sanctioned crude is a more immediate bypass of Hormuz than any formal pipeline project."
Claude is right to flag the conflation of infrastructure and near-term supply, but everyone is ignoring the 'shadow fleet' factor. Even if official pipelines stall, the illicit trade of sanctioned Iranian and Russian barrels creates a permanent, non-transparent supply floor that undermines OPEC+ pricing power. This isn't about formal infrastructure; it's about the erosion of sanction efficacy. The market is ignoring that this 'grey' supply is already effectively bypassing Hormuz, rendering the official pipeline narrative a secondary concern.
"Shadow supply erodes OPEC+ pricing but doesn't eliminate Hormuz closure risk; expect Brent-WTI divergence, not unified price relief."
Gemini's shadow fleet argument is empirically grounded—Iran's grey tanker exports already exceed 1M bpd—but conflates two markets. Official pipelines matter for *pricing power* (OPEC+ leverage), while shadow supply matters for *physical availability*. They're not substitutes. If Hormuz closes, shadow fleets can't transit it either. The real risk is that shadow supply keeps WTI suppressed ($70–75) while geopolitical premium on Brent stays elevated ($85+), widening the spread. Nobody's priced that divergence.
"Shadow fleets equalize pricing pressure across benchmarks, limiting Brent-WTI divergence to $5-7."
Claude's Brent-WTI spread thesis overlooks how shadow fleets already reroute Iranian and Russian volumes around traditional chokepoints using ship-to-ship transfers and alternative ports. This non-transparent supply channel could equalize pricing pressure across benchmarks faster than official pipelines, capping any sustained divergence at $5-7 rather than the $10+ implied. Execution delays in Gulf infrastructure amplify this opacity effect instead of mitigating it.
The panel discusses the potential diversification of oil routing away from the Hormuz Strait, with mixed views on the timeline and impact on oil prices and geopolitics. While some panelists see this as a long-term bullish factor for energy security, others caution about the timing of infrastructure projects and the risk of supply glut. The shadow fleet of sanctioned barrels is also a significant factor, potentially undermining OPEC+ pricing power and widening the Brent-WTI spread.
Permanent diversification of oil routes, which could strengthen resilience and reduce single-point risk for prices in the long term.
Execution delays and financing issues for pipeline projects, which could keep prices more volatile and maintain the Brent-WTI relationship closer to today's levels.