The United Arab Emirates is adjusting how it prices its offshore crude oil for contract buyers, moving away from a Dubai benchmark to a pricing mechanism that encourages the use of alternative export routes outside the Strait of Hormuz. This strategic shift is designed to ensure the continued flow of oil to global markets, even amidst heightened tensions and disruptions in the critical waterway, where traffic density has plummeted from approximately 130 vessel transits daily to as few as six at certain times.
This move by the UAE is part of a broader "zero Hormuz" strategy, a long-term plan to protect the flow of commodities and goods irrespective of the Strait's accessibility. Although analysts state a "Plan A is always a maritime leg" due to the sheer volume tankers can carry (upwards of 10,000 containers per vessel), the goal is to provide reassurance to global markets. This initiative includes expanding ports like Fujairah and Khor Fakkan on the Gulf of Oman, and improving energy pipelines, road, and rail networks. Current crude pipelines are not a match for tankers, and liquefied natural gas cannot be moved via pipelines.
The urgency for such measures is underscored by recent conflicts. The US-Iran war has already significantly impacted the UAE's distribution business, with container traffic through Jebel Ali port reportedly dropping from 40,000 to just 1,000 daily at one point. While some transits resumed after an interim US-Iran peace deal, numbers were only about a third of pre-war levels, and recent escalations, including renewed US-Iran strikes, have further dimmed prospects for stable passage, causing oil prices to jump to over $79 a barrel for Brent crude.
This pricing adjustment and infrastructure development are critical as competitors like deep-water ports in Colombo, Sri Lanka, and Vizhinjam, India, are actively seeking to capture market share. The UAE hopes to restore confidence in its long-term reliability as a trade hub, even as its major transshipment ports, such as Jebel Ali (which handled 15.5 million TEUs in 2024 and contributed $190 billion to Dubai's economy from May 2024-2025) and Khalifa Port (5.5 million TEUs in 2024), face challenges due to their location inside the Strait of Hormuz. These ports will need to leverage their integrated supply chain operations, including free zones and existing rail and road connections, to maintain their first-mover advantage.
