How UAE is well-positioned for resilience as Hormuz tensions recede

Khaleej Times

5 days ago

After days of escalating Gulf tensions following US strikes on Iranian nuclear sites, both Iran and Israel announced a ceasefire early today, easing fears of a full-fledged closure of the Strait of Hormuz.
While Tehran's parliament had approved the option to block the vital waterway on June 22, pending approval by its Supreme National Security Council the recent truce and Iran's restraint signal that this dramatic move was never likely.
But experts now say the UAE was never truly in the line of fire, and even if the worst had materialised, the country is among the best positioned in the region to absorb the shock.
'The recent US airstrikes on Iranian nuclear sites have dramatically heightened geopolitical tensions in the Gulf, placing the Strait of Hormuz, a critical maritime chokepoint, at the centre of global economic concern. Roughly 20 per cent of the world's daily oil supply, or about 17 million barrels per day, passes through this narrow waterway,' said Hamza Dweik, Head of Trading at Saxo Bank Mena.
'For the UAE, a temporary closure of the Strait would have immediate and multifaceted economic consequences, particularly in the areas of oil exports, imports, and inflation,' he added.
However, analysts point out that the UAE's exposure is cushioned by both infrastructure and policy foresight. A major portion of its oil exports can bypass the Strait via the Habshan–Fujairah pipeline, which runs directly to the eastern seaboard. Ports like Fujairah and Khor Fakkan also lie outside the Strait, ensuring continued access to international shipping lanes. Combined with the country's liberalised fuel pricing model, strategic stockpiles, and sovereign wealth buffers, these factors greatly reduce the impact of short-term disruptions.
The UAE exports around 3.5 million barrels of oil per day, with a significant portion transiting through the strait. While the Habshan–Fujairah pipeline offers an alternate route capable of transporting up to 1.8 million barrels a day, it doesn't fully offset the volume typically passing through Hormuz.
'On the import side, the UAE relies heavily on maritime routes for essential goods, including food, machinery, and construction materials. Disruptions would likely increase freight and insurance costs, delay shipments, and contribute to imported inflation,' Dweik said.
Konstantin Vladimirovich Tserazov, former Senior Vice President at Otkritie Bank, noted that global shipping had already started adjusting in anticipation of conflict.
'Right now, ships are already avoiding the area. MarineTraffic data shows vessels taking long detours, adding days to voyages. The UAE imports 90 per cent of its food and consumer goods by sea. Longer shipping routes mean higher costs—and those get passed to consumers.'
'With Dubai's financial hub deeply tied to trade, foreign investors might pull back, hurting capital flows just as the UAE pushes its non-oil growth,' he added.
Tserazov also flagged a less obvious risk: energy supply to power-hungry sectors like AI and data infrastructure.
'Data centres guzzle power, and that's a problem. The UAE is betting big on AI, expecting it to contribute 14 per cent to GDP by 2030. But AI needs data centres, and data centres need massive energy. Gas fuels 76.5 per cent of the UAE's electricity… If Hormuz closes, LNG shipments from Qatar (which also transit the strait) get cut off. Suddenly, keeping servers online competes with cooling homes and running factories.'
Despite these risks, maritime experts say the UAE was already positioned for resilience.
'A closure or escalation in the Strait of Hormuz would significantly disrupt maritime operations connected to the UAE, with consequences spanning trade, logistics, insurance, and security,' said Capt. Dilip Goel, who leads unified maritime asset monitoring and control at AD Ports Group.
'Any disruption could affect up to $10–15 billion in monthly trade flows, depending on the severity and duration. UAE ports like Jebel Ali, Khalifa, and Mina Rashid… would see schedule disruptions, vessel bunching, and cascading delays across container, tanker, and bulk traffic.'
Ports outside the strait, including Fujairah, the world's second-largest bunkering port, act as vital alternatives. Meanwhile, the UAE's strong financial position, with over $150 billion in reserves and nearly $1.5 trillion in sovereign wealth fund assets, offers enough cushion for short-term shocks.
'In short, while the UAE is better positioned than many Gulf nations to absorb and reroute, a prolonged closure of Hormuz would not just delay cargo, it would test the region's entire maritime security architecture, logistics resilience, and commercial adaptability,' Goel said.
While the danger appears to have passed for now, experts agree the UAE's strategic foresight, from energy pipelines and diversified ports to strong capital reserves, will continue to offer a reliable shield against regional volatility.