Oil markets may face 'catastrophic consequences' amidst Mideast war, warns Saudi Aramco CEO

Global oil markets are bracing for “catastrophic consequences” as a war between Israel and the United States against Iran continues in West Asia, according to Amin H. Nasser, chief executive of Saudi Aramco, who warned that prolonged disruption could severely harm the global economy.

“There would be catastrophic consequences for the world’s oil markets the longer the disruption goes on, and the more drastic the consequences for the global economy. There has been a 180-million-barrel of disruption so far,” Nasser was quoted as saying by Reuters on Tuesday.

“I am concerned about the elevated risks that people are facing in the region,” the oil major’s chief executive added, likely referring to mounting instability across key energy corridors in West Asia.


“While we have faced disruptions in the past, this one by far is the biggest crisis the region's oil and gas industry has faced,” Nasser said.

You can follow our live coverage of the West Asia war here

Hormuz disruption could shake global supply

The Aramco chief warned that any prolonged disruption around the Strait of Hormuz would have serious consequences for global oil flows.

“Almost 17% of the world’s oil supply from the region goes through Hormuz,” he said, calling it a significant potential disruption to the market if the conflict escalates further.

Normally, roughly 20% of the world’s oil shipments pass through the strait daily, but traffic has been severely disrupted during the conflict. Iran’s Islamic Revolutionary Guard Corps said on Tuesday it would not allow “one litre of oil” to be shipped from the Middle East if U.S. and Israeli attacks continued.

The remarks come as energy markets closely watch developments in the Israel-Iran confrontation, with analysts warning that even limited disruptions to Gulf shipping routes could send global crude prices sharply higher and ripple through the world economy.

The crisis has already hit shipping and insurance markets and could spread across a wide range of industries. Nasser said the disruption threatens to trigger wider domino effects across aviation, agriculture, automotive manufacturing and other sectors that depend heavily on energy supply.

Global crude benchmark Brent crude surged to a more than three-year high of nearly $120 per barrel on Monday before easing to around $92 on Tuesday after Donald Trump suggested the war could end soon.

Trump also warned that the United States would hit Iran “much harder” if it blocked exports from the energy-rich region and said the United States Navy could escort commercial ships in the Gulf to guarantee safe passage.

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Limited export routes and contingency plans

Nasser said the company currently has only one key export alternative to bypass the Strait of Hormuz, highlighting the importance of Saudi Arabia’s East-West pipeline.

“The only access we have is the East-West pipeline, a 7 million barrels per day line, which we are capitalising on for Arab Light and Extra Light,” he said.

The pipeline is being used to transport Arab Light and Arab Extra Light crude grades to the Red Sea port of Yanbu, allowing shipments to bypass the increasingly volatile Gulf shipping lanes. According to Nasser, the system is expected to reach its full capacity of 7 million barrels per day within the next couple of days as customers reroute cargoes.

He added that the company is currently supplying around 7 million barrels per day through the pipeline, which runs from the kingdom’s oil fields in the east to export terminals on the Red Sea coast.

"We have 2 million bpd of spare capacity, so if there is any shutdowns we need to take while managing the current situation, bringing it back is a matter of a couple of days for us," Nasser said.

At present, Aramco is not exporting oil from the Gulf because ships cannot load cargoes there, he added, though the company is still meeting the majority of its customers’ needs.

Nasser also noted that global oil inventories were currently at a five-year low and warned that the ongoing crisis could accelerate drawdowns unless shipping through the Strait of Hormuz resumes.

Contingency plans and storage flexibility

Despite the mounting risks, Nasser said Aramco has contingency plans in place for multiple scenarios to ensure uninterrupted deliveries to global customers.

“We always make sure we have adequate storage,” he said, adding that the company is currently meeting the majority of its customers’ requirements.

Nasser said the company has built flexibility into its global storage network, enabling it to draw on both domestic reserves and international storage hubs if supply chains are disrupted.

“We work on various scenarios to make sure the system has ample storage flexibility. Internationally we can tap our global storage hubs,” he said.

He also said a small fire caused by an attack last week at Aramco’s Ras Tanura refinery, the company’s largest domestic refinery, had been quickly extinguished and brought under control. The facility is now in the process of being restarted.

(With inputs from Reuters)