Bypassing Hormuz: Can Israel become a new logistics hub in the Middle East?

Strategic Background: The Fragility of the Strait of Hormuz Remains Unresolved

Following the U.S.-Iran agreement, geopolitical tensions in the Middle East have eased in the short term, offering a sigh of relief to global markets. However, historical experience shows that calm in the Middle East is often short-lived, and any political or military fluctuations could reactivate the Strait of Hormuz, the world's most critical energy chokepoint. This strait carries about 20% of global oil shipments, and its uncertainty has prompted countries and regions to seek alternative routes.

It is against this backdrop that the concept of the India-Middle East-Europe Economic Corridor (IMEC) has once again been placed on the agenda. IMEC aims to connect India with the Gulf, Israel, and Europe by combining maritime, rail, and land routes, bypassing high-risk areas such as the Strait of Hormuz and the Bab el-Mandeb. Hezi Halavia, Chairman of the Israel Ports Company, noted in a Ynetnews commentary that IMEC is not just about trade routes; it is a strategic opportunity for Israel to transform from a geopolitical island into a global supply chain hub.

Israel’s Competitive Advantages and Challenges

Located at the crossroads of Asia, Africa, and Europe, Israel possesses technological and innovative advantages, and has demonstrated the resilience of its port and logistics systems in recent wars—despite sustained attacks, there has been no severe shortage of consumer goods. However, Israel's port infrastructure is relatively limited, and the normalization process with Arab countries, especially Saudi Arabia, has been inconsistent, restricting land connections. The advancement of IMEC requires regional political coordination, and Saudi Arabia's stance, as a major Gulf power, is crucial. Currently, while Saudi Arabia has recognized Israel's existence, it has not yet established full diplomatic relations, adding uncertainty to the construction of the corridor.

Escalating Logistics Competition Among Gulf States

In the face of Israel's ambitions, Gulf states have not stood idly by. Saudi Arabia's Vision 2030 has identified the logistics sector as a pillar of its non-oil economy, planning to build megaports such as Jeddah Islamic Port and King Abdullah Port, as well as developing logistics hubs in NEOM's "The Line" and Red Sea projects. The UAE's Khalifa Port and Dubai World Central Airport already form a mature multimodal transport network, and sovereign funds like ADQ are investing in global logistics assets. Qatar and Oman are also expanding their ports to compete for regional transit status. These countries possess capital, geographical advantages (proximity to key sea and land routes), and established infrastructure, along with deep trade ties with Asia and Africa.

For Israel to become a core node of IMEC, it must compete with these rivals in terms of cost, efficiency, and geopolitical relations. Halavia acknowledged that "other countries are competing with Israel and promoting alternatives"—a clear reference to parallel projects by Saudi Arabia and the UAE, such as Saudi Arabia's "Land Bridge" rail plan and the UAE's "Cloud Bed" corridor concept.

Impact on Regional Economic TransformationContesting for logistics hubs is a core part of the Gulf states' economic diversification strategy. Traditional oil wealth is being redeployed into ports, railways, free trade zones, and the digital economy. If IMEC succeeds, it will accelerate Israel's integration into the regional economy, break its long-standing isolation, and provide economic leverage for Israeli-Palestinian peace. However, for Gulf states, Israel's rise may divert trade and investment originally destined for the Gulf, forcing them to enhance competitiveness or seek differentiated positioning. In the long run, multi-corridor competition will reduce global supply chains' reliance on a single node and strengthen the Middle East's overall role as a bridge for Asia-Europe trade—precisely the source of regional economic resilience repeatedly emphasized by the IMF and the World Bank.

Conclusion: The Transforming Logistics Landscape of the Middle East

The U.S.-Iran agreement has not eliminated the fundamental risks of the Strait of Hormuz; it only highlights the urgency of establishing redundant trade routes. Israel's proposal to position itself as a key node circumventing the strait is both a response to this risk and a leap in its national strategy from a security margin to an economic hub. However, political barriers, infrastructure shortcomings, and fierce competition from Gulf states mean this path is not smooth. In the next decade, the Middle East's logistics landscape will shift from the "one-man-holds-the-pass" Hormuz model to a complex network of multi-node, multi-corridor competition. Whoever strikes a balance among efficiency, security, and geopolitical relations will hold the passport to 21st-century global trade.