HSBC’s Georges Elhedery Says Alternative Routes Could Make Hormuz Redundant

Georges Elhedery, chief executive of HSBC Holdings, said in Dubai that alternative logistics routes funded by Gulf states could make the Strait of Hormuz redundant in the medium term. He spoke at a forum organised by his bank, as the war pitting Iran against the United States and Israel has blocked or disrupted traffic through the strait for several months. Against this backdrop, Macron is seeking diesel and oil supplies in the Gulf, while South Asian LNG demand would fall by around 6 Mt in 2026 (million tonnes of liquefied natural gas). The forecast was worded in the conditional and accompanied by a wish for the conflict to be settled. It is the opinion of a banker whose institution finances projects in the region.

A strait whose status is disputed

The Strait of Hormuz carries a considerable share of global energy trade. The “one fifth” figure is accurate for liquefied natural gas, of which Qatar is the leading exporter. For oil, the proportion depends on the baseline used: global consumption, seaborne trade or crude trade.

The strait’s current status is disputed. Washington maintains that it is open, while Tehran says it remains closed unless Iran grants permission. Available flow measurements are partial and dated.

Pipelines limited to two countries

For crude oil, the alternatives rely on pipelines that carry output from inland fields to ports outside the Gulf. These are on the Red Sea for Saudi Arabia and on the Gulf of Oman for the United Arab Emirates. Only these two countries operate such infrastructure, so the other Gulf producers remain almost entirely dependent on the strait.

Before the war, the spare capacity of these pipelines was far below the volume that usually passes through the strait. The Emirates are building an additional pipeline, parallel to the first, intended to sharply increase their export capacity through Fujairah. The ramp-up also depends on expanding the port’s loading facilities.

Bypass routes exposed to the war

The Saudi east-west pipeline, the kingdom’s main route for moving crude out of the Gulf, was shut down after a drone attack and then restarted at reduced rates. New attacks were subsequently reported, with conflicting information on the flow. The Houthis, a Yemeni movement, said they are targeting Saudi vessels in the Red Sea, which threatens the other end of this route.

Qatar’s liquefied natural gas has no equivalent to the bypass pipelines. The liquefaction complex is located inside the Gulf, and cargoes leave the region only by sea, through the strait. Qatar has also suffered strikes on its facilities, which put a portion of its export capacity out of service for an extended period.

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