The largest oil exporter globally has issued a severe warning about the potential devastating outcomes if the ongoing conflict in Iran continues to disrupt the flow of ships in the Strait of Hormuz.
Due to the disturbances, the transportation of oil through the strait, which typically accounts for about 20% of the world’s daily oil transit, has been significantly impeded.
Iran’s Revolutionary Guards have made a firm declaration that they will not permit any oil shipments from the Middle East if attacks by the US and Israel persist.
Amin Nasser, the CEO of Saudi Arabia’s state oil company Aramco, expressed grave concerns stating, “There would be severe repercussions for the global oil markets if the disruption prolongs… leading to increasingly drastic impacts on the worldwide economy.
He further added, “Although we have encountered disruptions previously, this current crisis stands out as the most significant challenge faced by the oil and gas sector in the region.”
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This stark warning was issued following the recent attacks on three commercial vessels in the crucial shipping channel. The crisis not only disrupts the shipping and insurance sectors but is also expected to have far-reaching effects on various industries such as aviation, agriculture, and automotive.
Global Brent crude prices, which peaked at over $120 per barrel on Monday, have now stabilized around $92 per barrel as of Wednesday.
Reports suggest that the International Energy Agency is considering recommending the release of oil from strategic reserves, with estimates indicating a potential release of 400 million barrels. This move could exert downward pressure on oil prices.
US President Donald Trump has cautioned Iran about the consequences of obstructing exports from the critical energy-producing region, hinting at possible escalated actions. He also mentioned the possibility of US Navy escorting ships in the Gulf to ensure safe passage.
Regarding the feasibility of US Navy escorts in the required scale, Nasser acknowledged the substantial volumes involved and highlighted that Aramco’s customers bear the delivery risks. He emphasized support for any steps that facilitate the delivery of their products to customers and the global market.
Nasser pointed out that global oil inventories are currently at a five-year low, indicating that the crisis will lead to faster drawdowns, underscoring the urgent need for the resumption of shipping in the strait.
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