Dubai is studying plans to build a $200 billion (£114 billion) mega-canal that would allow oil tankers to bypass the Strait of Hormuz. The Gulf emirate is understood to be considering the idea as a means of reducing Iran’s influence on the flow of oil from the region.

About 17 million barrels of oil a day are transported through the strait, equivalent to 40 per cent of the world’s traded oil.

However, the proposed canal project would be fraught with difficulty. Oil tankers weighing more than 300,000 tonnes would need a route through the mountainous region between Dubai and its Indian Ocean coast.

“Many studies on this have been presented, but nothing is solid,” a senior official of the Dubai Government told Dow Jones yesterday.

Iran has hinted repeatedly that, if threatened, it would target commercial vessels in the strait. The navigable tanker lanes are only six miles wide and any disruption could severely limit oil exports from the Gulf.

Engineers are understood to have presented the plans for a 112-mile canal to the Dubai Government. It would link the Gulf coast with the port of Fujairah on the Indian Ocean coast, crossing the Hajar Mountains with a network of enormous locks. The massive cost and complexity of the project is thought to have stalled a decision on the canal, but it could be a popular initiative with other Gulf states.

Iran’s location on the northern coast of the Strait of Hormuz effectively allows it to control the 90 per cent of Gulf oil that is exported by sea. Countries such as Saudi Arabia, Kuwait and Iraq are eager to find an alternative and could be persuaded to contribute to the project.

Mustafa Alani, of the Dubai-based think-tank Gulf Research Center, said: “Iran has clearly stipulated its intention to close the Strait of Hormuz in case of a military conflict in the region.”

Abu Dhabi is building a pipeline to Fujairah so its oil can avoid Hormuz. It will carry about 1.5 million barrels a day, but will not have the capacity to transport oil from Saudi Arabia or other producers.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive