Gulf Nations Divert Oil Amid Iran War: Costs Soar as New Routes Emerge

Gulf nations are scrambling to maintain the global flow of oil and gas, but the ongoing Iran war has drastically elevated costs and exposed vulnerabilities in the world's energy supply lines. With the Strait of Hormuz largely blocked by Iran since February 2026, nations are diverting billions into bypass routes, yet even these alternatives are now becoming targets, creating a complex and expensive maze for global energy trade. Since the conflict began, the International Energy Agency (IEA) has labeled the crisis the 'largest supply disruption in the history of the global oil market', causing Brent crude prices to surge past $100 a barrel and contributing to a global fuel crisis. Major pipelines like Saudi Arabia's East-West pipeline and the UAE's Habshan-Fujairah pipeline are working overtime, but have faced drone attacks and disruptions, pushing war-risk insurance premiums for tankers to record highs. This disruption has fueled inflation and raised risks of stagflation and recession, prompting the IMF to revise down global GDP growth forecasts for 2026. Looking ahead, the IEA warns that global oil supply will fall by an estimated 5.7 million barrels per day in 2026, a steeper decline than previously expected, with normal flows not anticipated to return until 2027. Gulf states continue to pour investments into new infrastructure, including ports and railways, while the US has proposed a $5 billion fund, the Partnership for Allied Trust and Construction (PACT), to help rebuild damaged facilities and develop more bypass routes. However, with dwindling global oil inventories and persistent attacks on alternative routes, the long-term security and cost of energy remain a critical global concern.