Weeks before the conflict with Iran began, Abu Dhabi Crown Prince Sheikh Khalid bin Mohammed Al Nahyan took over a $300 billion sovereign wealth fund. Now, months into this conflict that is reshaping the Middle East, that entity and its managers have become central to building the infrastructure needed to bypass Iran's control of the Strait of Hormuz.

Abu Dhabi is implementing a "zero Hormuz" strategy, with the Crown Prince's Fund becoming a core tool.

The wealth fund has become a key tool for Abu Dhabi in its efforts to reduce its dependence on Iranian-blocked waterways. While little known globally, the son of Abu Dhabi's ruler and the power brokers around him are now spearheading one of the world's largest infrastructure efforts, making them crucial to Washington, international commodity markets, and Wall Street bosses. Sheikh Khalid, in his forties, continues to play a significant diplomatic role, recently becoming one of the highest-ranking Arab officials to meet with Iranian President Pezechzian. Following the start of the Iranian conflict in February, Crown Prince Jassim Bouatba Zabi, CEO of Limad, and other Abu Dhabi officials emphasized the priority of securing the nation's infrastructure in discussions with Wall Street bosses such as Beledralli Fink. By May, the wealth fund had reached agreements with BlackRock, Singapore's Temasek, and the state-owned Abu Dhabi National Oil Company to jointly target up to $30 billion in infrastructure investments in energy transportation, logistics, and water.

A $30 billion partnership was reached with BlackRock and others, but the risks are significant.

This deal is an early indication of Sheikh Khalid's position as Crown Prince of the emirate, which possesses $2 trillion in sovereign wealth, and his renewed push for access to critical commodity infrastructure. The Abu Dhabi royal family's move to help reduce the world's dependence on the Strait of Hormuz will strengthen Trump's position on Iran and provide new avenues for foreign asset managers to profit from. However, this push is fraught with risks, as securing the emirate's commodities for global markets has implications. Iran's military threat to regional infrastructure remains a concern and could derail its multi-billion dollar plans. Transporting commodities over longer distances is challenging, given Abu Dhabi's expanding port area has previously been targeted by Iranian ballistic missile attacks.

Saudi Arabia's experience highlights the importance and risks of detours.

Eliminating dependence on key global waterways is a daunting task. Saudi Arabia's experience highlights both the importance and the risks of bypassing them. Saudi Crown Prince Mohammed bin Salman pushed for bypassing the Straits by expanding pipelines leading to Red Sea ports. However, in recent weeks, Saudi Arabia has been forced to temporarily close this crucial alternative route to the Straits of Hormuz following attacks by pro-Iranian militias. "The Abu Dhabi Crown Prince has a security background and has been given more diplomatic responsibilities in recent years, so critical infrastructure seems like a natural area for him to be responsible for," said Steffen Hertog, professor at the London School of Economics. "In my view, the key challenge is that even the UAE's eastern ports are close to Iran and within range of drones and short-range missiles."

The port of Fujairah has become a key area for expansion, but it also falls within the range of Iranian strikes.

The Crown Prince and his close team of officials are likely now particularly focused on expanding the port of Fujairah, a coastal city in the UAE located outside the Strait of Hormuz and leading to the Gulf of Oman. Limad's efforts are just one part of a broader UAE effort, with other entities such as oil giant Adnoc and Dubai port giant DP World also pushing forward projects to help bypass Hormuz. The Crown Prince, who also chairs the executive committee of Adnoc's board, is building a second oil pipeline that would double its export capacity through Fujairah. At a meeting in May, he instructed the company to expedite the project's delivery. Gulf states, including the UAE, have pushed for more dialogue and diplomacy with Iran. Despite this, merchant ships continue to face missile and drone attacks both in and out of the Persian Gulf, causing widespread damage, death, and injury. In a June interview, the UAE's Minister of Foreign Trade stated that the country hopes to move towards zero dependence on Hormuz, regardless of whether the strait is open or not.

The US Treasury Secretary predicted that the Strait of Hormuz would become a "useless body of water," but Qatar's Energy Minister called it "completely wrong."

U.S. Treasury Secretary Bessenter predicted that within two years, the Strait of Hormuz would “be like a useless body of water” because it would be bypassed by oil pipelines. This is easier said than done. The conflict with Iran has dragged on for months with no end in sight. Even Qatar’s energy minister described Bessenter’s view as “completely wrong.” The UAE’s Fujairah was also attacked by Iran at the height of the conflict. In March, debris from an intercepted drone caused a fire in an oil trading hub. While Iranian attacks on UAE assets appeared to have subsided in recent months, tensions escalated again in August when the UAE said it would sever all economic ties with Tehran after accusing Iran of launching ballistic missiles into its territory.

Editor's Summary

Abu Dhabi is advancing its Zero Hormuz strategy through the Crown Prince-led Limad Fund, partnering with international capital to accelerate the development of alternative infrastructure aimed at enhancing the resilience of its energy and commodity exports. This initiative has both geopolitical and commercial significance, but it faces security threats, cost challenges, and implementation uncertainties; its actual effectiveness ultimately depends on the course of the conflict and the progress of project implementation.

Frequently Asked Questions

Q: What is Abu Dhabi's "Zero Hormuz" strategy? A: This strategy aims to minimize dependence on the Strait of Hormuz by expanding pipelines, ports, and logistics facilities, ensuring that exports of commodities such as crude oil and petrochemicals can continue even when the strait is blocked. The core is developing alternative routes outside the strait, such as Fujairah. Q: What role does the Limad Fund play in this? A: Limad, Abu Dhabi's approximately $300 billion sovereign wealth fund led by Crown Prince Sheikh Khalid, has become a key tool driving related infrastructure investment. It partners with BlackRock, Temasek, and Adnoc, targeting up to $30 billion in investments covering energy transportation, logistics, and water. Q: Why was Fujairah chosen as a focus? A: Fujairah is located outside the Strait of Hormuz, facing the Gulf of Oman, and already has pipeline connections, serving as a bypass for exports. Adnoc is building a second pipeline to double its export capacity, while port expansion is also underway to support larger-scale commodity shipments. Q: What are the main risks facing this strategy? A: The Iranian military threat remains, and eastern ports are still vulnerable to drone or missile attacks; long-distance transportation is costly; and the Saudi alternative pipeline, which was forced to close due to an attack, demonstrates security vulnerabilities. The ongoing conflict also increases project uncertainty. Q: How can international cooperation support this strategy? A: Cooperation with BlackRock, Temasek, and others not only provides capital but also introduces professional management experience, helping to accelerate project implementation and creating opportunities for global investors to participate in key Middle Eastern infrastructure, while strengthening the UAE's position in the energy supply chain.