NextFin News - U.S. Treasury Secretary Scott Bessent has put an expiration date on the world's most important oil chokepoint. Speaking at a fireside chat with Larry Kudlow at a gathering of global finance chiefs in Asheville, North Carolina, Bessent said the Strait of Hormuz "will be bypassed in two years," adding: "In two years, the Strait of Hormuz will be like a worthless piece of water." Hours later, his Treasury Department signaled that Chevron is close to finalizing a deal to expand its operations in Venezuela — a move that would bring more heavy crude into the Atlantic Basin without ever touching the strait.
The two announcements are not coincidental. They form the twin pillars of a single strategy: drain Iran's leverage over the global oil market by building pipeline alternatives around Hormuz, while reopening Venezuelan barrels to U.S. buyers. The question now facing traders is whether the infrastructure can actually be built on the timeline Bessent is promising — and whether the market should price the strait as a fading risk or a persistent one.
The Two Pillars: Pipelines Around Hormuz, Barrels From Venezuela
Bessent's Asheville remarks sharpen language he used earlier in August. In an interview with an NBC affiliate on August 8, he said:
"What we are going to see over the next two years — the strait is going to become irrelevant. It is going to become just another body of water."
He put a specific number behind the claim, saying 50% to 70% of energy products normally shipped through the strait would instead move through underground pipelines. That is a bold claim against a daunting baseline. About 20 million barrels per day of crude oil and oil products were shipped through the Strait of Hormuz in 2025, according to the International Energy Agency — roughly 25% of the world's seaborne oil trade, with around 80% of those flows destined for Asia. The U.S. Energy Information Administration puts combined Saudi and UAE bypass pipeline capacity at about 4.7 million barrels per day, and the IEA's own estimate of redirectable pipeline capacity ranges from 3.5 million to 5.5 million barrels per day. Even at the top of that range, the pipelines cover barely a quarter of what crosses the strait.
Closing that gap requires not one project but a network. The United Arab Emirates is accelerating a $3 billion expansion of its pipeline to the Fujairah terminal on the Gulf of Oman, expected to come online next year. Saudi Arabia is studying a larger east-west expansion that energy analysts say could take several more years. Iraqi flows through Turkey remain a wildcard shaped by politics as much as engineering. And even when the big projects finish, the IEA does not see the strait emptying out. Rebecca Schulz, the agency's senior oil market analyst, said the volume of oil still needing to pass through Hormuz for total Gulf exports to return to pre-war levels "could exceed 10 million barrels per day — around half of prewar levels."
Half of prewar levels through a strait that Bessent says will be "worthless" is not a rounding error. It is a structural dependency that pipelines alone do not erase.
The second pillar arrived almost simultaneously. Chevron is close to completing negotiations to migrate all of its oil joint ventures in Venezuela into the country's new energy framework, according to people familiar with the matter. The agreement includes an asset swap allowing Chevron's Petropiar heavy-crude project — its largest in Venezuela — to expand into the neighboring Ayacucho 8 block, plus a second area in the vast Orinoco Belt. Chevron, which currently operates three joint ventures with state-run PDVSA and is the only major U.S. oil company still active in the country, declined to comment. Venezuela passed a new hydrocarbons law in January 2026 that allows foreign companies to operate and sell the country's oil, clearing a legal path that had been blocked for years.
The deal is part of a broader reopening. Other U.S. energy companies, including oilfield services provider Halliburton, are also in talks to invest in Venezuelan fields. In January, Bessent said additional sanctions on Venezuela could be lifted to facilitate oil sales, and that he saw a role for the U.S. Export-Import Bank in guaranteeing financing for the sector. His message about Chevron was explicit:
"Chevron has been there a long time and will continue to be there, so I believe that their commitment will greatly increase."
Why the Two Moves Belong Together
Read separately, the Hormuz comment is rhetoric and the Chevron deal is corporate development. Read together, they describe a deliberate re-routing of the global crude map. Hormuz matters because it concentrates risk: a single narrow waterway, just 22 nautical miles wide at its narrowest point, carries a quarter of global seaborne oil, and any threat to it sends a premium through every barrel on the water. If Gulf producers can reach tide-water terminals without transiting the strait, the military burden of keeping it open falls, and Iran's ability to hold the market hostage shrinks.
Venezuela fits the same logic from the demand side. Latin American heavy crude has long competed with Middle Eastern grades in U.S. Gulf Coast refineries, which are configured to process the sour, heavy oil that Venezuela's Orinoco Belt produces in abundance. Every Venezuelan barrel that flows north is a barrel that does not need to come around the Arabian Peninsula and through Hormuz. The strategic logic is straightforward: reduce the volume of traffic that must be protected in the strait, and the leverage of whoever controls it declines in tandem.
The market has already priced the disruption. Brent crude touched its highest level since August 2022 and WTI its highest since July 2022 after the U.S. and Israel launched joint air strikes on Iran in late February, putting both benchmarks up more than 40% from pre-conflict levels. U.S. gasoline prices climbed to a national average of $4.08 a gallon, up 28% year over year, according to AAA. On days when officials signal progress — such as when Bessent said Washington was "fine" with some ships transiting for now — crude has pulled back, with Brent falling 1.4% to $101.68 a barrel and WTI dropping 4% to $94.76 in a single session. As of September 1, Brent was trading near $94 a barrel, roughly 37% above its level a year earlier. The price path is not moving on fundamentals alone; it is moving on the perceived probability that the strait reopens.
That probability is now being priced against a policy clock. The transmission mechanism runs in three steps. First, official statements about bypass capacity compress the geopolitical risk premium embedded in crude futures. Second, a lower premium reduces the incentive for buyers to stockpile and for producers to rush alternative supply — the very behavior that would make the bypass real. Third, if the physical infrastructure then fails to arrive on schedule, the market is left short of both barrels and protection. This is the second-order trap: talking the strait down before the pipes are in the ground can delay the investment the thesis depends on.
The Counter-Case: Why 'Worthless' Is Almost Certainly Wrong on Timeline
The strongest argument against Bessent's thesis comes from the industry itself. Robert McNally, a veteran energy analyst, called the "irrelevant" prediction "way too strong and overstated." David Goldwyn, a former U.S. State Department special envoy for international energy, was blunter:
"I think that we have to accept that this crisis in the Strait of Hormuz, the constraints on exports are going to be a somewhat permanent feature for the next few years."
Their skepticism rests on three facts that do not bend to political will. First, pipelines are slow capital: the UAE's $3 billion Fujairah expansion is the fastest project on the board, and it comes online next year; the larger Saudi expansion is measured in "several more years." Second, even full build-out leaves a residual Hormuz requirement of more than 10 million barrels per day, per the IEA — a volume large enough that any closure would still shock the market. Third, the war has made the strait harder to monitor, not easier: tankers are switching off their AIS transponders, and commercial satellite imagery of transits has been restricted at the request of the U.S. government, leaving analysts flying partially blind.
There is also a durability question about the Venezuelan pillar. Venezuela's oil sector has been underinvested for years, and its infrastructure is degraded. Industry monitors reported in June that Chevron was producing about 260,000 barrels per day in Venezuela before the new deals, and that the Petroindependencia venture aims to raise output roughly 50% over two years. Even if that target is met, the incremental volume — on the order of 100,000 to 130,000 barrels per day from that venture alone — is meaningful but not market-transforming. It is a piece of the supply puzzle, not a replacement for the strait.
Cyclical or Structural: Separating the Two Forces at Work
This is where the analysis has to separate two forces that Bessent's language blends. The direction of travel is structural; the two-year deadline is cyclical politics.
The structural leg is real. Every dollar spent on a bypass pipeline is sunk capital that permanently reduces the share of Gulf crude forced through a single chokepoint. The UAE's Fujairah line, once expanded, cannot be un-built. The Venezuelan legal framework, once changed, cannot easily be reversed. And the strategic incentive for consuming nations to diversify away from Hormuz exposure survives any single administration. These are regime shifts: rules, regulation, and industry structure changing in a way that does not self-correct.
The cyclical leg is the timeline. Pipeline construction is bound by engineering schedules, permitting, and capital allocation — none of which respond to a Treasury secretary's calendar. History is not kind to political deadlines on energy infrastructure. The evidence floor for the cyclical read is clear: the fastest bypass project takes a year, the larger ones take several, and the IEA still sees more than 10 million barrels per day needing the strait even after they finish. That is a mean-reverting dynamic in disguise — the premium may compress on headlines, but the underlying exposure reverts to the physical constraint.
So the correct call is a hybrid: a structural shift in the right direction, arriving on a cyclical timeline that is almost certainly too optimistic. Getting this wrong matters. If investors treat the two-year claim as a structural endpoint, they will underprice the tail risk of a closure that still carries half of Gulf exports. If they dismiss the entire thesis as bluster, they will miss the genuine erosion of Iran's leverage over the medium term.
What to Watch: The Signal That Would Break the Thesis
The thesis that Hormuz loses its strategic value rests on a measurable threshold. Watch combined Gulf bypass capacity — the Fujairah line, the Saudi east-west pipeline, and Iraqi routes to the Mediterranean. If that capacity does not exceed roughly 10 million barrels per day by the end of 2027, and Hormuz flows remain above half of pre-war levels, the "worthless" call is wrong on its own terms.
On the Venezuela side, watch whether Chevron's migration into the new framework is accompanied by actual capital commitments and rig reactivation, not just contract signatures. Contract migration is the easy part; turning Orinoco heavy crude into sustained, sanction-proof flow is the hard part. A concrete signal would be a reported increase in Chevron's Venezuelan daily output above the roughly 260,000 barrels per day baseline, alongside visible rig movement in the Orinoco Belt.
Scenarios split cleanly by horizon. In the short term, crude remains bid on any sign that Hormuz stays constrained, and headlines from Asheville can knock the risk premium down as quickly as they built it. Over the medium term, the direction of travel favors bypass capacity and Venezuelan barrels — both are real, funded, and aligned with U.S. policy. Over the long term, the structural question is whether the world still needs Middle Eastern seaborne crude at all, as the energy transition erodes oil demand growth. Bessent's two-year clock is almost certainly too fast. But the direction he is pointing in — away from chokepoints and toward diversified, overland supply — is the durable trend.
The Strait of Hormuz will not be worthless in two years. But the market is being paid, barrel by barrel, to bet that it never will be.
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