US Treasury Secretary Bessent says Strait of Hormuz will become “another body of water” in 2 years

Treasury Secretary Scott Bessent made a bold prediction on August 8: the Strait of Hormuz, one of the most strategically important chokepoints on Earth, will be reduced to “another body of water” within two years. The waterway that currently handles roughly one-fifth of all global oil and gas traffic could lose the majority of its energy throughput to underground pipelines, according to Bessent’s forecast.

The pipeline pivot

Bessent’s core argument centers on infrastructure. He projects that 50 to 70 percent of the energy currently routed through the Strait of Hormuz will be redirected through underground pipelines over the next two years.

Gulf states are already moving fast to make this a reality. Saudi Arabia is pushing ahead with a Red Sea pipeline that would allow crude exports to bypass the strait entirely. The UAE, meanwhile, has been expanding capacity at its Fujairah terminal on the Gulf of Oman, which sits outside the chokepoint and connects to Abu Dhabi’s oil fields via overland pipeline.

Rising US-Iran hostilities throughout 2026, combined with military actions and tightened sanctions, have turned theoretical supply disruptions into actual ones. Shipping through the strait has already been significantly impacted since early this year.

Why the strait mattered in the first place

The Strait of Hormuz is a narrow passage between Iran and Oman, connecting the Persian Gulf to the open ocean. At its narrowest point, it’s about 21 miles wide. For decades, it has been the single most important bottleneck in global energy supply chains, with approximately 20% of the world’s oil and gas passing through it.

The escalation in early 2026, tied to the broader US-Israel-Iran conflict, appears to have crossed a threshold. Rather than continuing to treat the strait’s vulnerability as an acceptable risk, Gulf producers and their Western allies have apparently decided the cost of building alternatives is now lower than the cost of continued exposure. The US has been running naval escorts and enforcing sanctions in the region.

What this means for energy markets and beyond

Global oil pricing has long baked in a “Hormuz risk premium,” essentially a surcharge reflecting the possibility that supply through the strait could be disrupted at any moment. Remove the strait’s dominance from the equation, and that premium shrinks considerably.

Saudi Arabia and the UAE stand to benefit from this transition. Countries that invest early in bypass infrastructure gain more control over their export routes, reducing their dependence on a chokepoint that a hostile neighbor can threaten.

Iran, conversely, loses one of its most powerful pieces of geopolitical leverage. If the strait no longer carries the bulk of Gulf energy exports, Tehran’s ability to threaten global supply by disrupting passage diminishes sharply.

Bessent’s public declaration suggests the US government is already planning for the post-Hormuz era, with these developments expected to have lasting implications for geopolitics and energy economics well beyond the current US presidential term.

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