"Catastrophic" Fallout: Saudi Aramco CEO Warns of Global Economic Collapse as Hormuz Blockade Deepens

Saudi Aramco CEO Amin Nasser has issued an alert to world markets, describing the ongoing closure of the Strait of Hormuz as a "nightmare scenario." Speaking during an earnings call on Tuesday 6, Nasser emphasized that the global economy faces unprecedented peril if the strategic waterway, through which nearly 20% of the world’s oil flows, remains obstructed by the escalating conflict between the U.S., Israel, and Iran.

“Catastrophic Consequences"

Nasser pointed to the potential for a long-term crisis, stating, "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."

He further added that the shockwaves have already reached far beyond the energy sector, “The disruption has caused a severe chain reaction in not only shipping and insurance, but there's a drastic domino effect on aviation, agriculture, automotive, and other industries.”

With global inventories at a five-year low, the world is entering a period of rapid reserve depletion. To mitigate the shock, Aramco has activated its 1,200-kilometer East-West Pipeline, a critical alternative route that bypasses the Strait to reach the Red Sea.

"The only access we have is the East-West pipeline, a 7 million BPD, which we are capitalizing on for Arab Light and Extra Light. No issues regarding storage capacity domestically and abroad," Nasser noted.

While this allows Saudi Arabia to maintain exports for nearly 17% of the total regional supply, Nasser warned that it cannot fully offset the loss of the Strait of Hormuz.

India Invokes ECA as Cities Face LPG Shutdown

The crisis is hitting home in India, where the government has invoked the Essential Commodities Act (ECA) to prevent a national fuel collapse. All domestic refineries have been ordered to halt petrochemical production and divert every available molecule of propane and butane into the LPG pool for households.

The Bangalore Hotels Association and the Chennai Hotels Association have reported a total halt in commercial cylinder supplies, warning that thousands of eateries across Bengaluru and Chennai may be forced to shut their kitchens effective today, March 10. To prevent hoarding, the Ministry of Petroleum has also increased the mandatory gap between domestic cylinder bookings from 21 to 25 days.

Also read: Govt Invokes ECA to Tackle LPG Crisis; Refineries to Boost Output