Saudi Aramco profit jumps 33% as Iran war lifts crude prices

Saudi Aramco's adjusted net income jumped 33% to US$33.4 billion in the second quarter, beating analyst estimates, as war-driven crude prices near US$97 a barrel outweighed lower volumes from the Strait of Hormuz closure.

The increase was driven mainly by higher prices for crude oil and refined and chemical products, partly offset by lower volumes sold, higher operating costs and increased taxes, according to the company's statement on Tuesday.

The result topped the US$31.1 billion average of analyst estimates compiled by Bloomberg. Upstream earnings rose primarily on higher crude prices, while adjusted downstream earnings nearly doubled from a year earlier on stronger refining margins. Brent crude averaged almost US$97 a barrel during the quarter as the Hormuz closure caused the biggest oil supply disruption in history.

Aramco redirected most exports to the Red Sea to bypass the closed chokepoint, but now faces a new threat as Yemen's Houthi group attacks tankers using that route. Severe and prolonged disruptions to Red Sea supplies would rock the market further, pushing prices higher as maritime traffic via Hormuz remains severely constrained.

Aramco, which operates refineries along Saudi Arabia's Red Sea coast, has been maximizing fuel exports to take advantage of surging prices for products such as diesel and jet fuel, which have frequently outstripped gains in crude. Even when Brent fell back below US$75 a barrel following an interim US-Iran peace deal, product prices stayed elevated, giving the company a second source of windfall revenue beyond its crude sales.

The windfall extends across the industry. Shell's profit more than doubled to US$9.8 billion, while Chevron recorded its highest quarterly profit in six years, both benefiting from the same war-driven price surge. The last comparable supply shock came in 1973, when the Arab oil embargo quadrupled prices and reshaped the global economy for a decade, a reminder of how quickly energy disruptions can ripple through growth and inflation.

Red Sea Threat Opens a New Front

Those shipments are increasingly at risk as the Houthi militants attack vessels, opening a new front in the war and threatening millions of barrels of Saudi crude and products. The group has said it attacked Saudi tankers, threatening a new chokepoint in the Red Sea. The Strait of Hormuz carries about 20% of global oil consumption, and its closure has already caused the largest supply disruption on record. Any additional loss of Red Sea capacity would compound the squeeze, keeping the risk premium embedded in crude prices elevated. For Aramco, the danger is that its main export route becomes as unreliable as the one it just abandoned.

Product Margins Outpace Crude

Aramco's downstream strength reflects a market where refining margins have widened sharply. Adjusted downstream earnings nearly doubled from a year earlier even as the company sold lower volumes, a pattern that mirrors the broader industry where product prices have stayed high after crude retreated from its peak. The company has said it is maximizing such fuel exports to capture those margins, a strategy that now carries greater risk as the Red Sea route comes under attack.

For global markets, Aramco's results show how deeply the Iran war has reshaped energy economics. The combination of a closed Hormuz and a threatened Red Sea route leaves little slack in the supply chain, so any further escalation could push prices well above the US$97 average seen in the quarter. For oil-importing economies, that translates into sustained inflationary pressure and higher energy costs through the rest of the year, even as peace talks offer the prospect of eventual relief.

This article is for informational purposes only and does not constitute investment advice.