By Elsie Kamsiyochi
The closure of the Strait of Hormuz—one of the world’s most vital energy corridors—has sent shockwaves through global markets, sharply dividing the economic fortunes of Middle Eastern oil exporters.
A Reuters analysis shows that while Iran, Oman, and Saudi Arabia have reaped massive financial gains from surging oil prices, their regional neighbors lacking alternative export routes are facing steep revenue losses.
The disruption began after Iran effectively shut the Strait in response to U.S. and Israeli airstrikes in late February, escalating a conflict that has destabilized the entire region. Hormuz is the gateway for roughly 20% of global oil and liquefied natural gas flows, making it one of the most strategically important maritime chokepoints on the planet.
Although Tehran later announced it would permit passage for vessels without U.S. or Israeli links, the partial relaxation has done little to ease the turmoil. Brent crude prices soared 60% in March alone—the largest monthly spike on record—as traders braced for supply shortages. Meanwhile, U.S. President Donald Trump has warned that Iran faces devastating retaliation if it does not agree to reopen the strait fully by the end of Tuesday.
Geography Defines the Winners and the Wounded
The crisis has underscored a stark truth: in the Middle East, energy security is often determined by geography. Iran, Oman, Saudi Arabia, and the United Arab Emirates possess pipelines and ports that bypass Hormuz, allowing them to maintain exports despite the shutdown. Countries trapped behind the bottleneck—Iraq, Kuwait, and Qatar—have seen their crude stranded, costing them billions.
In March, Iraq and Kuwait experienced catastrophic revenue declines of roughly 75% compared to the previous year. By contrast, Iran’s estimated oil income rose 37%, buoyed both by higher prices and reduced competition. Oman’s revenues jumped 26%, and even Saudi Arabia—despite lower export volumes—managed a 4.3% increase. Only the UAE saw a slight decline, a modest 2.6% drop moderated by sharply higher global prices.
Energy analysts say the broader U.S.-Israeli confrontation with Iran may unintentionally strengthen Tehran’s leverage. “Now that Hormuz has been closed, it can be closed again—and again,” said Neil Quilliam of Chatham House. “The genie is out of the bottle.”
The International Energy Agency described the situation as the largest energy supply shock in modern history, citing more than 12 million barrels per day of disrupted regional output and damage to dozens of energy facilities.
Saudi Arabia’s Strategic Pipeline Cushion
For Saudi Arabia, the crisis has highlighted the importance of long-standing infrastructure built during earlier regional conflicts. The kingdom’s East-West pipeline—a 1,200-kilometre conduit from its eastern oilfields to the Red Sea—was constructed during the 1980s Iran-Iraq war specifically to avoid relying on Hormuz. Today, it is operating at full capacity, allowing Riyadh to keep exports flowing even as the strait remains blocked.
Despite a 26% drop in crude export volumes in March, Saudi Arabia’s oil income rose by an estimated $558 million due to the dramatic increase in global prices. This financial boost is timely as the kingdom faces heavy expenditures tied to its Vision 2030 economic diversification projects, which had contributed to budget deficits.
Still, analysts warn that Saudi Arabia is not immune to risk. Iranian forces and allied Yemeni Houthis have demonstrated their capability to strike deep into Saudi territory, including the kingdom’s western energy infrastructure and shipping routes through the Bab el-Mandeb strait.
Iraq and Kuwait Take the Hardest Hit
Among all Gulf producers, Iraq has suffered the most, with March revenues plunging by 76% to just $1.73 billion. Kuwait followed with a 73% collapse in revenue. Both nations are expected to see even deeper losses in April, as early-March shipments that slipped out before the conflict escalated will no longer be counted.
Iraq briefly saw a glimmer of relief when Iran permitted one tanker to pass through the strait under an exemption. But this small concession has done little to offset the enormous losses.
Financial analysts note that most Gulf states have buffers—fiscal reserves and the option to issue debt. Bahrain is the exception, facing greater vulnerability due to higher debt levels. For others, the question is not survival, but how long they can bankroll the crisis.
A Turning Point for Global Energy Strategy
While some Western oil companies and governments are urging increased fossil-fuel investment to shield against future supply shocks, others argue that renewable energy offers a more sustainable long-term solution. The ongoing disruption has already spurred major actors to accelerate their shift away from oil dependence.
In a notable move, France’s TotalEnergies and the UAE’s Masdar recently launched a $2.2 billion joint venture to expand renewable projects across nine Asian nations—a sign that the crisis may catalyze a global realignment of energy priorities.
Source Reuters
Original article
Comments