Aramco Warns Strait of Hormuz Disruptions Could Trigger “Catastrophic Consequences” for Global Oil Markets
Saudi Aramco warned that prolonged disruption of Strait of Hormuz shipping could have “catastrophic consequences for the world's oil markets,” citing alternative pipeline routes are in use to maintain supply, Reuters reported.
ERBIL (Kurdistan24) - Saudi Arabia’s state-owned oil company Aramco warned Tuesday that continued disruption of shipping through the Strait of Hormuz could trigger “catastrophic consequences” for global oil markets, as shipments from the Gulf remain largely blocked amid rising regional tensions, Reuters reported.
The company said it is relying on its East-West pipeline to maintain supply to international customers while the strait remains inaccessible.
Aramco Chief Executive Amin Nasser told reporters during an earnings call, as noted by Reuters, that if shipping in the strait is not restored, the consequences for both the oil market and the broader global economy would be severe.
“There would be catastrophic consequences for the world's oil markets and the longer the disruption goes on … the more drastic the consequences for the global economy,” Nasser said. He described the current situation as the “biggest crisis the region's oil and gas industry has faced.”
The Strait of Hormuz, a critical maritime route through which roughly 20% of the world’s oil typically passes daily, has seen shipments largely halted after threats and attacks linked to the ongoing conflict involving Iran, Reuters added.
Iran’s Islamic Revolutionary Guard Corps stated Tuesday that it would not allow “one litre of oil” to leave the Middle East if U.S. and Israeli military operations continue.
According to Reuters, Aramco is currently unable to load oil from Gulf ports, but noted that the majority of customer demand is being met through alternative routes.
The East-West pipeline, which transports Arab Light and Arab Extra Light crude grades to the Red Sea port of Yanbu, is expected to reach its full capacity of seven million barrels per day within days as customers re-route shipments. The company also said crude can be directed to meet domestic demand.
A minor fire that broke out last week at Aramco’s Ras Tanura refinery, the company’s largest domestic facility, was quickly extinguished and the facility is in the process of being restarted, Reuters reported Nasser as saying.
Nasser highlighted that the crisis is affecting not only the oil and shipping sectors but also a broad range of other industries, including aviation, agriculture, and automotive manufacturing. He emphasized that global oil inventories are at a five-year low, meaning supply drawdowns could accelerate if shipping disruptions persist, Reuters noted.
Brent crude, the global benchmark, spiked to nearly $120 per barrel on Monday following heightened concerns over supply disruptions but was trading around $92 per barrel on Tuesday after comments from U.S. President Donald Trump suggesting the conflict could conclude soon, Reuters reported.
Trump also warned that the United States could take more severe action if Iran obstructs exports from the region and indicated that the U.S. Navy could provide escort to shipping vessels, though capacity to do so remains uncertain amid ongoing military operations.
The current shipping blockage has compounded broader regional and global market pressures, according to Reuters. Nasser said the company is taking steps to mitigate immediate supply disruptions but stressed that resumption of Strait of Hormuz transit is essential to stabilize markets.
Aramco’s warning comes amid a broader decline in annual profit, with the company reporting a 12% decrease largely attributed to lower crude prices, Reuters noted. The company also announced a share buyback plan of up to $3 billion, marking its first-ever repurchase initiative.
As global energy markets adjust to the disruption, Aramco said it is prioritizing the use of the East-West pipeline to maintain international supply chains and minimize the impact on clients, Reuters reported. The company’s operational adjustments are intended to ensure continued delivery while the geopolitical situation in the Gulf remains uncertain.
The CEO reiterated the urgency of reopening shipping lanes in the Strait of Hormuz. He emphasized that the longer the disruption continues, the more severe the potential consequences for global energy markets and the international economy, Reuters noted.
The company’s statements underline the immediate operational and economic challenges stemming from the regional conflict and its impact on maritime oil transport, while signaling a reliance on infrastructure such as the East-West pipeline and domestic refineries to offset supply constraints.
Aramco continues to monitor the situation closely, with contingency measures in place to manage crude distribution and safeguard deliveries to customers worldwide, Reuters reported.