US and Gulf allies draft $10bn fund to bypass Hormuz chokepoint

Key points

• The initiative, named the Partnership for Allied Construction & Trust (Pact), involves a $5 billion US contribution matched by $5 billion from regional partners.
• The fund targets reconstruction of pipelines, refineries, and terminals damaged during the ongoing conflict with Iran, as well as new bypass routes.
• Brent crude prices have risen to nearly $100 per barrel, and US diesel prices have hit record highs due to disrupted shipping through the strait.
• Technical negotiations between Washington and Arab states are scheduled to begin in October, with the US chairing the fund’s board.
• The proposal lists major private capital firms, including Blackstone, BlackRock, and KKR, as potential investors, though some were reportedly surprised by their inclusion.

Background

This proposal follows months of escalating tensions in the Middle East, including a US-backed Gaza peace push in August 2026 and Qatar’s earlier rejection of pipeline bypasses in favor of LNG expansion. In September 2026, Syria also explored a $5.7 billion pipeline to bypass Hormuz, highlighting the broader regional push to diversify energy transit routes amid wartime blockades.

How outlets are covering it

The Financial Times emphasizes the strategic goal of neutralizing Iran’s leverage by creating redundant energy routes, noting that the US aims to chair the initiative and that private firms were named without prior consultation. IranWire highlights the practical challenges, noting that while Saudi Arabia and the UAE have alternative pipelines, nations like Qatar and Kuwait remain heavily dependent on Hormuz. It also points out regional skepticism about rebuilding infrastructure before a formal peace deal is secured, given the risk of renewed Iranian strikes and Houthi disruptions in the Red Sea.

Why it matters

The closure of the Strait of Hormuz, which previously carried about 20% of global oil and gas, has triggered significant price spikes and supply chain disruptions. This fund represents a major shift in US energy policy, seeking to decouple regional energy flows from a single chokepoint and stabilize global markets through long-term infrastructure investment.

What to watch

Technical negotiations between the US and Arab partners are set to begin in October. Trump is expected to meet with Arab leaders on the sidelines of the UN General Assembly in New York to advance the proposal. The success of the fund depends on whether private capital firms and sovereign wealth funds commit to the estimated $50 billion+ investment platform.