Hormuz bypass workarounds keep Gulf oil flowing at steep cost

September 24, 2026 at 01:00 AM2 min

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Ship-to-ship transfers and pipelines bypassing the Strait of Hormuz have become the primary export route for most Middle Eastern oil. Saudi Arabia restarted its East-West pipeline this week, sending oil prices sharply lower. The workarounds keep crude flowing even as the market remains in deficit.

Key Facts

Saudi Arabia restarted its East-West pipeline this week after Houthi strikes damaged it last week.
The East-West pipeline had been rerouting about 4 million barrels daily to Yanbu before the drone attacks forced its shutdown.
Oil flows via the Strait of Hormuz have averaged 6.5 million barrels daily since the start of the month, down from roughly 20 million barrels before the U.S. and Israel began bombing Iran at the end of February.
Iraq has discounted its crude because it lacks alternatives to Hormuz due to its geography.

Pipeline Rerouting

The East-West pipeline previously carried crude to the Strait of Hormuz for loading onto tankers. After Iran shut down the chokepoint, Saudi Arabia reversed flows to the Red Sea port of Yanbu, though export volumes were lower due to limited port capacity. Houthi strikes on Saudi infrastructure, including the East-West pipeline, forced its shutdown earlier this month. Without the pipeline, Aramco sent more crude back to the Persian Gulf for movement through Hormuz and ship-to-ship transfers near Oman.

Ship-to-Ship Transfers

Ship-to-ship transfers take place in the Gulf of Oman, outside Hormuz, where crude is loaded onto small vessels and then transferred to larger tankers. The practice was previously used by sanctioned nations such as Venezuela, Iran, and occasionally Russia, but has now become regular in the Persian Gulf. The transfers add to the end price of the cargo, prompting Gulf exporters to discount their crude. Iraq's discount is especially notable because its geography leaves no option besides Hormuz.

Market Impact

Oil prices dropped sharply this week on news that Saudi Arabia restarted the East-West pipeline. Traders have adjusted to the new export rates, so any news of increased production or exports pushes prices lower even though the market remains in deficit. Kpler data reported by Reuters shows Hormuz flows averaged 6.5 million barrels daily since the start of the month, compared with roughly 20 million barrels before the bombing of Iran began.