Iran Struck Oman's Ports. The Shipping Market Then Sent More Vessels.

Iranian drone strikes in early March 2026 hit two of Oman's three main deepwater ports, suspended Salalah operations for several days, and pushed Omani waters into the London insurance market's war risk zone. That is the damage side of the ledger. The other side: the shipping market, running out of alternatives after the Strait of Hormuz effectively halted on insurance grounds, rerouted enormous volumes through those same ports. Within weeks, ship calls at Sohar had risen roughly 40 percent and the value of goods crossing the Oman-Saudi land border had nearly tripled. Oman's logistics position was simultaneously damaged and confirmed.

What the Strikes Actually Hit

The 2026 Iran war began on February 28, when US and Israeli forces struck Iranian nuclear and military sites. Within days, Iran responded with drone attacks across the Gulf. Oman was not a passive bystander: the ports of Duqm and Salalah both host US military logistics infrastructure, which made them Iranian targets.

In early March, drones struck Duqm and Salalah, damaging at least one fuel storage tank at Duqm (Wikipedia, "2026 Iranian strikes on Oman"). On March 11, Salalah was struck again, setting two fuel tanks on fire and forcing the port to suspend operations (ibid.). Sohar, while not directly hit, fell within the London Joint War Committee's high-risk maritime area designation, which automatically raises insurance costs for any vessel calling there. Nineteen people were killed and 35 injured across the initial wave of strikes on Omani territory.

The insurance market moved unusually fast. Within 48 hours of the opening US-Israeli strikes, war risk premiums surged roughly fivefold. By early March, major marine insurers had withdrawn existing coverage and were offering replacements at approximately sixty times pre-crisis rates, according to a Howden Re analysis published March 27 (Howden Re, "Strait of Hormuz," March 27, 2026). Protection and indemnity war risk cover was effectively unavailable for vessels transiting Omani waters from around March 5. The US Maritime Administration issued an advisory confirming Iranian attacks on commercial shipping in the Persian Gulf, Strait of Hormuz, and Gulf of Oman (MARAD Advisory 2026-004).

By March 2, the Strait of Hormuz, through which roughly 20 percent of world oil and gas flows, had largely halted. The closure was driven primarily by the insurance market's withdrawal rather than physical blockade (The National, March 2, 2026). That distinction matters: it means the reopening condition is also partly an insurance market decision, not purely a military or diplomatic one.

Record Traffic While Under Fire

The shipping market had nowhere else to go. With Hormuz effectively closed and the Red Sea still disrupted from earlier Houthi operations, Oman's three deepwater ports became the least costly alternative for cargo bound for Gulf markets.

Maritime intelligence firm Windward tracked the scale of the shift in a report published approximately one month into the conflict. Sohar Port logged a 1,766 percent increase in ship destination change requests, meaning vessels originally routed elsewhere were diverted to Sohar at a rate with no recent precedent (Windward, "A Month Into the Iran War," early April 2026). Route diversions to Salalah, even as the port was recovering from the March 11 strike, rose 800 percent (ibid.). Ship calls at Sohar rose roughly 40 percent and cargo handling capacity rose around 55 percent from pre-war levels, according to Oman's Ministry of Transport, Communications and Information Technology (AGBI, "Imports rise at Oman port with Hormuz closure," March 2026). Half the incoming cargo at Sohar was food, followed by medicine and industrial materials, feeding regional depots established near the port for onward supply to Gulf neighbours.

Land crossings moved in parallel. The value of goods crossing the Oman-Saudi border at Ramlet Khelah nearly tripled in March, rising to approximately $830 million from roughly $300 million in February (AGBI, March 2026). One trucking operator, Ramool Transportation, reported that its earnings in March 2026 exceeded its total revenue for all of 2025 (ibid.).

Trade corridors were formalized quickly. Dubai Customs established a Green Corridor with Oman, routing cargo from Omani ports overland to Dubai via the Hatta crossing with accelerated digital clearance. By March, that corridor was recording thousands of customs declarations per week (Container Magazine, April 5, 2026). Qatar separately designated Sohar, Salalah, and Duqm as formally recognised alternative ports to Hamad Port for the duration of the disruption (Omanet).

This is the kind of stress test that Vision 2040's logistics hub ambitions require Oman to pass. As the site's assessment of Oman's international cooperation and investment climate sets out, positioning Oman as a neutral corridor hub depends on both physical infrastructure depth and diplomatic relationships that hold under pressure. March 2026 tested both simultaneously, and both held, at a cost.

The India CEPA Complication

The India-Oman Comprehensive Economic Partnership Agreement (CEPA), signed in Muscat in December 2025 and ratified by Royal Decree in early 2026, was scheduled to take effect on April 1, 2026, making it Oman's first bilateral trade agreement in nearly two decades (PwC, 2026). The Iran conflict disrupted that timeline.

AGBI reported in March 2026 that unidentified Indian government officials indicated the war could delay implementation, citing the administrative and customs coordination required to activate the agreement under conflict conditions (AGBI, "Iran war may delay Oman-India Cepa rollout," March 2026). Indian Commerce Minister Piyush Goyal subsequently confirmed the CEPA was expected to come into force on June 1, a two-month slip from the original target (AngelOne/media reports, 2026).

The delay holds back formal activation of zero-tariff access covering roughly 98 percent of Indian tariff lines and approximately 99 percent of India's exports to Oman by value (DD News). It also defers the investment, professional mobility, and regulatory cooperation chapters of the agreement. The UAE has had a live CEPA with India since 2022, meaning Oman enters each month of non-implementation at a relative disadvantage in attracting India-linked investment.

The trade relationship was operating regardless. India was already systematically rerouting agricultural exports through Sohar and Salalah once Hormuz closed, and Indian cargo volumes at Omani ports were running well above pre-war levels throughout March (Maritime Gateway). India is the third-largest GCC export destination for Oman, and Indian exports to Oman roughly doubled between 2018-19 and 2022-23 before the CEPA was even signed (AGBI, March 2026). The delay is a formal and investment-layer setback, not a trade halt.

Neutrality Under Pressure

Oman attempted to prevent the war before it started. Foreign Minister Sayyid Badr Albusaidi stated publicly, within hours of the opening US-Israeli strikes, that a diplomatic deal had been within reach (Oman Ministry of Foreign Affairs). That effort collapsed with the first wave of airstrikes.

Throughout March and into April, Oman refused to join GCC condemnations of Iran and maintained quiet communication with Tehran even after Iranian drones struck Omani territory. Egypt and Pakistan subsequently joined Oman in attempting to broker a ceasefire (Washington Times, March 26, 2026). A Pakistani-mediated truce took effect on April 7-8, and Oman was identified as the only GCC state not specifically targeted by Iranian military operations once the ceasefire held (Responsible Statecraft).

That outcome has real economic meaning. Oman's insurance position is likely to improve faster than neighbors once war risk designations are revised, and its diplomatic access to both sides creates channels for managing commercial disputes in what remains a fragile post-ceasefire environment. For shipping lines and logistics operators assessing Oman's reliability as a long-term hub, the fact that Muscat was the only Gulf capital not drawn into the conflict on either side is a data point.

The neutrality drew criticism from Washington hawks. The Foundation for Defense of Democracies published an analysis in early March arguing Oman risked isolation by not taking sides (FDD, March 4, 2026). That view did not prevail in GCC or broader partner-country reactions, but it signals a tension in the US-Oman relationship that matters for specific economic programs.

The US-Oman Critical Minerals Framework, which the joint statement from the January 2026 third Strategic Dialogue described as near completion (US Department of State, January 25, 2026), had not been formally signed as of mid-April. The framework is intended to integrate Oman's mining and processing sector into US-aligned critical mineral supply chains, a priority that grew in importance once Washington identified Gulf mineral processing capacity as strategically relevant. Whether the war-period neutrality tension delayed conclusion of the framework is not confirmed in public documents.

The Delivery Machinery

Oman's port and logistics network is managed through the Asyad Group, the state-owned logistics conglomerate overseeing Sohar Port and Freezone, the Port of Salalah, and operations at the Special Economic Zone at Duqm. The rapid rerouting response in March drew on capacity that had not been fully utilised at normal operating conditions. Asyad infrastructure at Sohar, including deep-water berths and handling equipment, absorbed the surge without a physical collapse.

The Public Authority for Special Economic Zones and Free Zones (OPAZ) meanwhile continued signing investment agreements through the disruption. In early April, OPAZ executed agreements for new manufacturing projects including an EV battery anode material plant at the Salalah Free Zone and a steel mould manufacturing facility at Duqm, indicating that the conflict did not shut down zone-level investment activity entirely (SaudiGulf Projects, April 2026).

The longer structural play is INSTC integration. Russian Deputy Prime Minister Marat Khusnullin had confirmed, before the war, ongoing collaboration with Oman to designate the country as a southern terminus of the International North-South Transport Corridor, which links Russia with Iran, Central Asia, and India through multimodal routes (Omanet). The Iran conflict complicates the Iranian segment of that corridor but strengthens the case for a southern Oman bypass as an alternative routing. That is a multi-year structural discussion, not a March-April event, but the war accelerated its urgency.

Risks and Open Questions

The insurance cost burden is structural, not merely temporary. Even with a ceasefire in place, war risk premiums for vessels in Omani waters will remain elevated until the London Joint War Committee formally removes the designation. That process takes time even in improving security environments, and elevated premiums raise charter costs for every shipping line using Oman's ports as a hub, reducing the competitiveness edge the ports otherwise hold over higher-cost competitors.

Physical infrastructure at Duqm and Salalah requires repair. Damaged fuel storage at Duqm and fire damage at Salalah must be restored before those facilities return to full operating capacity. No official timeline for that restoration had been publicly confirmed as of mid-April.

The April 7-8 ceasefire is fragile. It was brokered by Pakistan and is not underpinned by a formal US-Iran agreement. A return to active hostilities would immediately restore all the disruption dynamics of March. Oman's ports, now far more visible globally as bypass infrastructure, could face more targeted and sustained Iranian strikes in any renewed conflict, particularly given the US military presence at Duqm and Salalah.

The CEPA delay is a softer but real risk. Each month of non-implementation is a month in which investment and professional-mobility provisions are inactive, while the UAE's live India CEPA continues to give Dubai and Abu Dhabi a comparative advantage in attracting India-linked business.

There is also a data gap. No official series publicly reports port throughput or logistics sector revenue in real time. The figures available from AGBI and Windward in March and early April are drawn from ministry statements and shipping intelligence platforms, not official consolidated port authority data. The full picture of what the war surge did to Oman's logistics economics will take months of official reporting to confirm.

UAE and Saudi Arabia: A Limited Comparison

Saudi Arabia's East-West crude oil pipeline and the UAE's Abu Dhabi Crude Oil Pipeline to Fujairah both bypass Hormuz for oil exports. In that narrow sense, both governments have partial workarounds. But neither pipeline covers general cargo or LNG, and neither covers the volumes that commercial container shipping requires.

UAE ports were not struck during the conflict. Dubai and Abu Dhabi did not carry war risk designations, which gave them a temporary competitive advantage in insurance costs over Oman's ports through most of March. The Dubai-Oman Green Corridor was partly designed to exploit the combination: UAE customs infrastructure plus Omani port geography. That arrangement benefits Oman but also reflects a structural dependency, the rerouting trade flows were not flowing to Oman in isolation but through a UAE-Oman joint mechanism.

Saudi Arabia's eastern ports, including Dammam and Jubail, sit on the Gulf side of Hormuz and were therefore more exposed to the closure, not less. Cargo destined for Saudi markets increasingly had to transit through Oman or Jordan rather than directly by sea. That made Oman a logistics service provider for Saudi supply chains as well as its own, which is a Vision 2040 positioning argument made real by an emergency rather than by market competition.

A clean ranking of which Gulf logistics position improved most is not possible from available data. The answer depends on how quickly insurance designations are revised, what infrastructure commitments shipping lines make, and whether the India CEPA and other bilateral frameworks convert the crisis-driven routing into durable commercial relationships.

Why This Matters for Oman

Vision 2040's logistics hub ambition has always carried an implicit assumption: Oman's geography, outside Hormuz, makes it structurally more resilient for shipping during Gulf tension. The March 2026 experience complicated that thesis in both directions. Oman was not safe enough to avoid Iranian targeting. But it was useful enough that the global shipping market rerouted record volumes through it anyway, while Hormuz was closed and alternatives were scarce.

The path that matters for Vision 2040 is not how Oman's ports perform during a six-week crisis but whether the crisis generates lasting trade frameworks, permanent capacity investment, and embedded shipping-line relationships. The Dubai Green Corridor, the Qatar port designations, the India CEPA (delayed but still expected), and the US critical minerals framework are all pieces of that embedding. How many convert from emergency arrangements or near-final frameworks into durable bilateral structures will determine whether March 2026 marks a turning point for Oman's logistics position or a footnote.

The 19-place jump in economic freedom rankings that independent benchmarks recorded in March provides useful context on the structural position Oman carried into this period. The benchmark reading was a signal of improving business fundamentals. The Iran war was the stress test that immediately followed it.