Saudi Arabia's Aramco, the world's top oil exporter, said on Tuesday there would be "catastrophic consequences" for the world's oil markets if the Iran war continues to disrupt shipping in the Strait of Hormuz.
Oil shipments have been largely blocked from traversing through the shipping artery, where normally roughly 20 per cent of the world's oil would pass through daily. Iran's Revolutionary Guards said on Tuesday they would not allow "one litre of oil" to be shipped from the Middle East if US and Israeli attacks continue.
"There would be catastrophic consequences for the world's oil markets and the longer the disruption goes on...the more drastic the consequences for the global economy," Aramco CEO Amin Nasser told reporters on an earnings call.
"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."
The crisis has not only upended the shipping and insurance sectors but also promises to have drastic domino effects on aviation, agriculture, automotive and other industries, he added.
Global crude benchmark Brent, which rocketed to a more than three-year high of nearly $120 a barrel on Monday, was trading around $92 on Tuesday following comments by US President Donald Trump predicting the war could end soon.
Trump warned that the US would hit Iran much harder if it blocked exports from the vital energy-producing region.
He has also said the US Navy could escort ships in the gulf to guarantee safe passage. But the navy's capacity to do that is unclear, with some vessels engaged in carrying out strikes against Iran and shooting down its missiles.
Nasser noted global inventories of oil were at a five-year low and said the crisis will lead to drawdowns at a faster rate, adding that it was critical that shipping in the strait resumed.
At present, Aramco is not exporting oil from the gulf as ships cannot load cargoes from there. But the company, which does not disclose its exact crude output, is meeting the majority of its customers' needs, he said.
The East-West pipeline is being used to transport Arab Light and Arab Extra Light crude grades to the Red Sea port of Yanbu. The pipeline is expected to reach its full capacity of seven million barrels per day in the next couple of days as customers re-route, he added.
In addition to the pipeline, Aramco is also able to direct crude towards domestic demand, he noted.
A small fire from an attack last week on Aramco's Ras Tanura refinery, its largest domestically, was quickly extinguished and brought under control, Nasser said, adding that the refinery was in the process of being restarted.
His comments come after Aramco reported a 12 per cent drop in annual profit mainly due to lower crude prices. It also announced it would repurchase up to $3 billion worth of shares in its first-ever buyback.
(Reporting by Yousef Saba and Maha El Dahan; Writing by Nadine Awadalla; Editing by Edwina Gibbs)