US Treasury Secretary Scott Bessent stated on Tuesday that the Strait of Hormuz will lose its significance as a crucial oil shipping route within two years, becoming a "worthless piece of water." He made these remarks during a fireside chat with Larry Kudlow at the G20 finance ministers' meetings in Asheville, North Carolina. Bessent's forecast is based on the acceleration of pipeline projects designed to bypass the strait, which has seen disruptions and heightened tensions following a conflict between Washington and Tehran.
Bessent estimates that up to 70 percent of the energy currently routed through Hormuz will eventually be transported via overland pipelines. This shift is driven by a desire to "de-risk everywhere in the world" as Iran has attempted to use the strait as a choke point. While Bessent acknowledged that the strait is not a choke point for the US, it remains one for many other nations. Major oil producers are investing billions of dollars in alternative pipeline infrastructure, including the UAE's West-East crude oil pipeline expansion, which aims to double export capacity through Fujairah by 2027.
Other significant projects include Saudi Arabia's East-West pipeline to the Red Sea, which previously handled about 7 million barrels per day during a Hormuz shutdown. Iraq is also exploring pipelines through Syria to the Mediterranean and repairs to existing systems. Kuwait is considering connecting its infrastructure to Saudi Arabia and the UAE to access Fujairah or Red Sea ports. These investments indicate that Gulf producers are incorporating bypass capacity into their export systems rather than treating it as a contingency plan, potentially reducing the global energy supply's exposure to tensions in the waterway. The US administration hopes increased economic pressure on Iran, including secondary sanctions targeting countries dealing with Tehran, will lead to negotiations to reopen the strait.
