Saudi Arabia’s state-owned oil giant, Aramco, has warned of “catastrophic consequences” for global oil markets if the US-Israeli war with Iran continues to obstruct shipping in the Strait of Hormuz.
Amin Nasser, the chief executive of Aramco, has characterised the current disruption as the most significant crisis the regional oil and gas industry has ever faced, reports The Guardian.
Despite the blockade, the firm expects to provide the market with approximately 70 per cent of its typical crude output by using alternative routes and tapping into storage.
The blockage, which followed US strikes on Iran 11 days ago, has effectively removed roughly 20 million barrels of oil daily from the global market.
While nearly 100 tankers typically traverse the narrow waterway each day, traffic has plummeted to single digits following threats from the Islamic Revolutionary Guard Corps to “set ablaze” any vessel using the route, which carries a fifth of the world’s oil and liquefied natural gas.
To mitigate the impact, Aramco is rerouting crude through its east-west pipeline to the Red Sea port of Yanbu.
The company plans to increase shipments through this pipeline to its full capacity of 7 million barrels per day; of this, 5 million barrels will be allocated for the global market – representing 70 per cent of the kingdom’s usual exports – while the remainder will supply domestic refineries.
Nasser noted that the company is currently meeting most customer needs by tapping into crude reserves held outside the Gulf region, though he cautioned these could not be relied upon for an extended period.
Oil prices saw a sharp decline on Tuesday after US President Donald Trump suggested the conflict could conclude “very soon”. Brent crude, the international benchmark, fell 14 per cent to approximately $85 a barrel. This follows a peak of $119 earlier this week, the highest price recorded since the 2022 invasion of Ukraine. Markets in London and Europe also staged a relief rally, with the FTSE 100 rising 1.6 per cent.
Meanwhile, G7 leaders have requested that the International Energy Agency (IEA) prepare scenarios for a potential release of emergency oil stockpiles to stabilise the market. IEA member countries are required to hold at least 90 days of emergency supplies, with total public reserves exceeding 1.2 billion barrels.
Additionally, China, the world’s largest energy importer, is estimated to hold record reserves of up to 1.4 billion barrels.
