The Iran war and the closure of the Strait of Hormuz have shattered a status quo that prevailed among Middle East oil and gas producers for decades. Even if the current, shaky ceasefire holds, the uneasy “new normal” has likely set the stage for yet another round of conflict.
Tehran has now demonstrated both its ability and willingness to seal off the critical waterway and strike vital infrastructure across the region, fundamentally altering the risk calculus for its neighbours and jeopardizing Gulf countries’ long-term oil and gas strategies.
The six-week war laid bare deep tensions between the Islamic Republic and its key regional neighbours Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Iraq – all close U.S. allies. They had long avoided direct confrontation with Tehran under a tacit understanding that war would devastate their shared economic interests. But that entente cordiale has now been blown apart.
At the heart of the crisis lies the Strait of Hormuz. Iran closed the waterway for the first time in history, trapping nearly a fifth of the world’s oil and gas supplies inside the Gulf, delivering a devastating shock to the region and the global economy. Even if shipping ultimately resumes, the unprecedented act marks a historic rupture.
Iran has signalled that it wants to retain leverage over the strait under any future peace deal, floating the idea of controlling traffic and charging vessels a transit fee. U.S. President Donald Trump has urged Tehran to fully reopen the waterway, and on Sunday said the U.S. Navy would immediately start blockading the strait, raising the stakes after marathon talks with Iran failed to reach a deal to end the war.
Yet even a formal reopening would do little to erase the lesson the war has taught Iran’s neighbours. The threat of Iran closing the strait – now proven feasible with limited military effort – is a genie that cannot be put back into the bottle.
NO WAY OUT
The war has sharply exposed how vulnerable the region’s energy infrastructure is.
Fighting between the U.S., Israel and Iran quickly spilled across borders as Iranian missiles and drones struck dozens of targets in neighbouring countries, including major oil and gas facilities across the Gulf.
Around 11 million barrels per day of oil production and Qatar’s entire LNG output were forced offline, while refineries, export terminals and other critical installations suffered extensive damage.
For Saudi Arabia, the world’s largest crude exporter and de facto leader of OPEC, the implications are especially troubling. Even the alternative export route it painstakingly developed in recent decades to bypass Hormuz proved vulnerable.
The kingdom’s East-West Pipeline, designed to divert roughly 7 million barrels per day from the eastern oil heartland to the Red Sea port of Yanbu, was hit within hours of the U.S.-Iran ceasefire announcement.
Saudi Arabia, which exported around 8 million bpd of oil before the war, said the attacks had cut its oil production capacity by around 600,000 bpd and reduced throughput on the East-West Pipeline by about 700,000 bpd.
At the same time, the UAE’s oil export pipeline to the port of Fujairah, which sits outside the strait, was also struck repeatedly. And for Qatar and Kuwait, the strait remains the sole export route.
While this situation might look like a checkmate for Tehran, the Gulf is more apt to see it as an intolerable status quo that will need to be remedied.
STRATEGIES BLOWN UP
This new reality strikes at the core of the Gulf’s economic model – both now and in the future.
For starters, the region faces years of reconstruction and instability that will undermine national development plans, even if the elevated geopolitical risk premium keeps energy prices higher.
The long-term threat is even greater.
The war has jolted many nations – particularly in Asia – into a painful reassessment of energy import dependence. For the Gulf, that comes at the worst possible moment: producers were already facing the need to maximise exports in the face of potentially diminishing demand as major importers shift away from fossil fuels. The conflict will only accelerate it.
For Gulf producers who expect uninterrupted exports of oil, liquefied natural gas, refined products, chemicals and fertilizer to fund their economies for decades to come, uncertainty over Hormuz is simply unsustainable, not only geopolitically but economically.
Consequently, the key regional powers, Saudi Arabia and the UAE – both of which harbour international ambitions economically and geopolitically – are unlikely to accept any strategic reality in which Iran can constrain their goals over the long term. That, in turn, points to a heightened risk of future confrontation.
“The strait must be open – fully, unconditionally and without restriction. Energy security and global economic stability depend on it. The weaponization of this vital waterway, in any form, cannot stand,” Sultan Al Jaber, the CEO of UAE state oil giant ADNOC, said last week.
NO GOING BACK
The terms of whatever “permanent” peace deal the parties eventually agree to will matter less than the fact that this war has broken a long-standing taboo: targeting vital economic infrastructure in the Gulf is no longer off limits.
That shift alone makes the regional balance of power more volatile, casting a long shadow over the Middle East for years to come.
The rally in global equities and the decline in oil prices following last week’s ceasefire announcement suggest investors believe the Middle East will soon return to business as usual.
They are almost certainly wrong. The most likely outcome is not a restoration of the old order but a new normal – one in which Gulf powers seek to ensure Iran can never again wield the Hormuz trump card.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
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(Ron Bousso; Editing by Marguerita Choy and Christina Fincher)