Persian Gulf states are launching a massive, multi-billion-dollar infrastructure and defense spending spree to permanently decouple their supply chains and economies from the Strait of Hormuz following repeated disruptions by Iran.

Amid a fragile ceasefire between Washington and Tehran, Gulf Cooperation Council (GCC) members are accelerating $290 billion in new and expanded transit bypass projects, moving quickly to eliminate structural vulnerabilities exposed by recent missile attacks and shipping blockades.

The push comes as regional economies brace for severe downturns. Recent damage to energy infrastructure—estimated at $25 billion—and the near-total closure of the Strait of Hormuz have triggered the worst economic crisis in the Gulf in decades. According to Capital Economics, gross domestic product in 2026 is forecast to shrink by 13% in Qatar, 8% in the United Arab Emirates, and 6.6% in Saudi Arabia. The International Monetary Fund expects broader Middle Eastern economic growth to slow to 1.1%, down from pre-conflict projections of 3.6%.

In response, regional governments are shifting from viewing bypass options as contingency plans to treating them as urgent national security infrastructure.

“From the Saudi and Gulf viewpoint, the 2026 Hormuz crisis has permanently altered their threat perception,” said Hesham Alghannam, a Saudi Arabia-based political scientist at the Malcolm H. Kerr Carnegie Middle East Center. “Iran’s willingness to weaponize the strait is no longer seen as an occasional risk but as a permanent structural vulnerability. Reliance on a single choke point is now considered unacceptable.”

“We are Iran-proofing our economies,” said one Gulf official, speaking on condition of anonymity.

The multi-year projects, slated for completion between late 2026 and 2034, aim to permanently reroute 30% to 50% of Gulf exports away from Hormuz toward the Red Sea and overland corridors, with later phases targeting up to 80% diversion. Key initiatives include:

• The $250 billion, 1,352-mile Gulf Railway Project linking all six GCC nations
• A new 1,000-plus-mile Saudi freight rail corridor connecting eastern oil fields directly to Jordan and onward to Europe
• Rail links connecting the UAE to Oman, as well as cross-border pipelines heading to Oman’s Duqm port
• Expansion of the Abu Dhabi Crude Oil Pipeline to Fujairah, alongside the Saudi Landbridge rail and Red Sea port developments in Yanbu and Jeddah

Concurrently, Gulf states are pursuing a quiet arms race to bolster home-grown defense capabilities and patch radar and anti-air vulnerabilities. The UAE, Saudi Arabia, and Qatar have entered talks or struck defense agreements with Ukraine, South Korea, Japan, and Turkey to acquire advanced interceptors, radar networks, and drone technologies. Efforts are also underway to consolidate disparate regional air defenses into a unified network to counter future Iranian missile barrages.

While security risks to Red Sea alternative routes remain—particularly from Iranian proxies such as Yemen’s Houthis—Gulf policymakers maintain that building out land connections creates a stronger foundation for long-term regional stability.

“If Iran says ‘my future is interlinking with the global economy and interconnectivity, and I need the Gulf states, Central Asia, and Turkey,’ they will find people willing to work and cooperate with them,” said Mohammed Baharoon, director-general of the Dubai Public Policy Research Center. “If they don’t want to, that is a different issue. We want Iran to say, ‘I want to be a part of this.'”