Saudi Arabia, through its national oil company Saudi Aramco, has warned that the global oil market could face serious problems if the conflict involving the United States, Israel, and Iran continues to block shipping in the Strait of Hormuz.
Even with the blockade, Saudi Arabia says it may still be able to supply about 70% of its normal oil production.
However, Aramco’s CEO Amin Nasser warned that the world economy could face serious consequences if the disruption continues.
Since US airstrikes on Iran 11 days ago, oil tankers from the Middle East have not been able to pass through the Strait of Hormuz. This has removed about 20 million barrels of oil per day from the global market.
Despite these concerns, oil prices fell on Tuesday after Donald Trump said the conflict might end “very soon.”
The price of Brent crude oil, the main global oil benchmark, dropped by 14% to around $85 per barrel on Tuesday evening.
Before the US-Israel strikes on Iran, oil was about $72 per barrel. Earlier this week it had risen to $119, the highest price since the Russian invasion of Ukraine.
Stock markets in Europe and the US also rose slightly:
London’s FTSE 100 increased 1.6%
Germany’s DAX rose 2.4%
France’s CAC 40 gained 1.8%
US markets were also rising during afternoon trading on Wall Street.
Nasser said that although the region has faced oil disruptions before, this is the most serious crisis the Middle East oil and gas industry has experienced.
Because ships cannot pass through the Strait of Hormuz, Aramco has not been able to export oil from the Gulf. However, the company hopes to continue supplying customers by sending oil through the east-west pipeline to the Red Sea port of Yanbu, where it can still be shipped to buyers.
Aramco plans to increase the use of this pipeline to its maximum capacity of about 7 million barrels per day.
