（Singapore, 18.03.2026）The near shutdown of the Strait of Hormuz is forcing a rapid and costly reshaping of global energy flows, as producers, refiners and traders scramble to secure supply while financial markets try to gauge the broader economic fallout.
The narrow waterway, which normally carries about one-fifth of the world’s oil and liquefied natural gas, has effectively been blocked by Iran, triggering one of the most significant disruptions to global energy logistics in recent years. In response, Gulf oil producers are accelerating the use of alternative export routes, while major importers are drawing on reserves and shifting trade patterns.
Gulf exporters reroute, but capacity limits remain
Saudi Arabia and the United Arab Emirates are leading efforts to bypass Hormuz, ramping up pipeline exports that avoid the chokepoint entirely.
Saudi Arabia has sharply increased flows through its East-West pipeline, which transports crude to the Red Sea port of Yanbu. According to the International Energy Agency (IEA), shipments surged from an average of 1.7 million barrels per day in 2025 to a record 5.9 million barrels per day earlier this month. The pipeline is expected to reach its full capacity of 7 million barrels per day within days.
The UAE is making similar moves via its Habshan-Fujairah pipeline, which links inland oil fields to the port of Fujairah on the Gulf of Oman. Flows have climbed to around 1.8 million barrels per day, effectively maxing out capacity and nearly doubling pre-crisis levels.
While these workarounds are helping to sustain exports, they also highlight structural constraints. Even at full capacity, alternative routes cannot fully replace the volumes that typically pass through Hormuz, leaving global supply tight and vulnerable to further shocks.
Adding to the uncertainty, U.S. strikes on Iran’s Kharg Island, a critical hub handling about 90% of the country’s oil exports, have raised fears of additional disruptions. Any damage to storage, pipelines or terminals could further tighten supply and amplify price volatility.
Trade flows reshuffle as India and China adapt
The supply shock is already reshaping global crude trade flows, particularly in Asia.
India has emerged as a major beneficiary of shifting supply dynamics, rapidly increasing purchases of Russian oil after receiving temporary approval from the United States. In one week alone, Indian refiners bought about 30 million barrels of Russian crude, helping offset reduced Middle Eastern supplies.
This surge in demand has triggered a wave of mid-voyage diversions. Several tankers originally bound for China have changed course toward India, reflecting stronger pricing incentives and urgent demand from Indian refiners.
China, meanwhile, is leaning on its extensive reserves. Refiners could draw as much as 1 million barrels per day from commercial stockpiles over the next four to six weeks. With an estimated 1.4 billion barrels of combined reserves, Beijing has a significant buffer, though it has so far opted for more cautious measures such as restricting fuel exports and encouraging use of on-site inventories.
The competition for non-Middle Eastern crude is intensifying. With buyers including Japan and South Korea returning to the Russian market, prices could face renewed upward pressure despite short-term volatility.
Markets weigh inflation risks against geopolitical uncertainty
Despite the scale of disruption, financial markets are showing cautious resilience.
Global equities have extended gains, supported by optimism in sectors less exposed to energy shocks, particularly technology stocks. At the same time, oil prices have eased slightly, with Brent crude hovering around US$101 per barrel after a recent decline.
Part of the relief reflects efforts to restore alternative supply routes, including Iraq’s move to resume exports through Turkey, as well as expectations that the conflict may not escalate into a wider regional war.
Still, investors remain on alert as the energy shock presents a complex challenge for central banks, especially the U.S. Federal Reserve, which must balance inflation risks from higher oil prices against signs of slowing economic momentum.
Bond yields have edged lower as oil’s recent dip softens inflation concerns, but analysts warn that a prolonged disruption could quickly reverse that trend. If energy prices climb again, it may delay interest rate cuts and strengthen the U.S. dollar.
For now, markets appear to be looking past immediate tensions. However, if the conflict drags on, the fragile balance between supply, demand and pricing could shift again, with broader implications for global growth and financial stability.
