Aramco heads into 2026 on solid ground — but warns of “severe consequences” for Hormuz closure

Saudi Aramco’s 2025 earnings featured resilient cashflows, a dividend hike, and the company’s first-ever share buyback. However, the balance sheet took a backseat to CEO Amin Nasser’s blunt assessment of the ongoing conflict with Iran: the disruption in the Strait of Hormuz is the “biggest crisis” the region’s energy sector has ever faced.

The oil giant is projecting a narrative of financial fortress-building while simultaneously executing an aggressive physical supply-chain pivot — actively draining global storage to meet customer obligations, capping production of certain crude grades, and maxing out its cross-country pipeline infrastructure to bypass the Arabian Gulf entirely.

By the numbers

Net income for 2025 landed at USD 93.4 bn, a 12% y-o-y decrease driven largely by weaker crude and refining prices. Crude averaged USD 69.20 / bbl in 2025, down from USD 80.20 in 2024. However, adjusted net income came in at a robust USD 104.7 bn. Aramco generated USD 136.2 bn in operating cashflow last year, leaving USD 85.4 bn in FCF.

The payout: Shareholders — primarily the government and the Public Investment Fund, which together hold over 97% of the company — will see a 3.5% bump in 4Q base dividends to USD 21.89 bn. Total distributions for 2025 hit USD 85.5 bn, down from over USD 120 bn last year. Aramco also announced it’s launching a USD 3 bn share buyback over 18 months, a first for the energy giant.

Why a buyback now? Aramco’s gearing ratio — a measure of indebtedness — dropped to a remarkably low 3.8%. The company traditionally favored dividends to fund the Kingdom’s multi-tn USD economic diversification plans. However, while Aramco shares have risen over 12% this year amid geopolitical premiums, they have lagged behind Western supermajors like Shell and ExxonMobil. The buyback — though a drop in the bucket for a USD 1.7 tn company — signals a bid to tighten the freefloat and convey absolute confidence to institutional investors during a period of extreme regional volatility.

The Yanbu pivot

With Iranian threats and military action effectively closing the Strait of Hormuz to commercial shipping, Aramco is aggressively rerouting crude to the Red Sea port of Yanbu.

The math: Nasser confirmed that the East-West pipeline will max out its 7 mn bbl / d capacity within days to bypass the Arabian Gulf. Aramco typically exports about 7 mn bbl / d, relying heavily on its east coast terminals, according to Bloomberg. Some 2 mn bbl / d is immediately absorbed by domestic refineries on the west coast — leaving Aramco scrambling to push the remaining volume onto the global market from a coast not traditionally built to handle the entirety of the Kingdom’s export capacity.

More than 25 supertankers are currently Yanbu-bound, which will grant Saudi Arabia the capacity to ship 50 mn barrels from the Red Sea port, Bloomberg reports, citing its ship-tracking data. The actual size of the flotilla is unclear as some vessels do not reveal their destinations during wars and conflicts.

Oil exports through Yanbu averaged 2.2 mn bbl / d in the first nine days of March, and are on track to reach a monthly high, Reuters reports, citing shipping data. Yanbu’s capacity can handle upwards of 4.5 mn bbl / d, traders told Reuters.

REMEMBER- Hormuz handles roughly 20% of the world’s daily oil supply. The ongoing conflict has forced Middle Eastern producers, including Iraq, Kuwait, and the UAE, to slash production. Saudi alone is reducing output by as much as 2.5 mn bbl / d.

Aramco is prioritizing its most plentiful Arab Light and Extra Light grades through the pipeline, Nasser said. The company has paused utilization of medium and heavy crude grades because there isn’t an adequate alternative export capacity to get them to market.

MEANWHILE- The massive Ras Tanura refinery only restarted production yesterday, following a direct Iranian drone attack last week.

What’s next? Catastrophic consequences, says Nasser

The CEO did not mince words regarding the macro outlook, warning of “catastrophic consequences” for the global economy if the blockade drags on. Oil prices briefly touched USD 120 / bbl on Monday — the highest since June 2022 — before pulling back to USD 87.8 after the US hinted at a potential de-escalation.

A temporary solution: Aramco is currently draining its global storage inventories located outside the Kingdom to meet customer obligations without Gulf shipping. Still, “that cannot be used […] for an extended period of time,” Nasser said in the earnings call.

Global spare capacity is heavily concentrated in the GCC. If the market tightens further due to demand spikes or additional supply shocks elsewhere, the barrels needed to balance the market are physically locked behind the contested waterway.

The impact? Some 350 mn bbl of disruptions will eventually come off the market — even with the Yanbu pivot, Nasser said.

Not just an energy story: The war is already causing “a severe chain reaction” and “a drastic domino effect” on multiple sectors, including “aviation, agriculture, automotive, and other industries,” Nasser said.

Some good news: Nasser confirmed that the oil giant’s major oil, gas, and downstream projects remain unaffected by the war.