The world’s leading oil exporter has issued a stark warning about the “catastrophic consequences” as tensions in the Iran conflict disrupt shipping lanes through the Strait of Hormuz. Despite these disruptions, global stock markets have shown signs of recovery.

Although crude oil prices have significantly declined following President Donald Trump’s assertion that the Middle Eastern conflict is “pretty much” resolved, the crucial passageway, which facilitates the transit of one-fifth of the world’s oil supply, remains largely inaccessible.

President Trump has cautioned Iran, threatening “death, fire, and fury” if the country continues to obstruct oil supplies through the strait.

Saudi Aramco chief Amin Nasser

In response, Iran’s Revolutionary Guard has vowed that not “one litre of oil” will leave the region as long as U.S. and Israeli airstrikes persist.

Reports, which were later refuted, suggested that the U.S. Navy had escorted a tanker through the strait, causing further volatility in oil prices.

By Tuesday evening, crude prices had dropped to nearly $80 a barrel, after nearing $120 during early trading on Monday.

‘This is the market reacting to the possibility that the Strait of Hormuz could reopen,’ said Andrew Lipow, founder of Lipow Oil Associates.

But with the war still raging, despite Trump’s suggestion the end was approaching, the boss of Saudi Aramco sounded the alarm over the impact of prolonged disruption in the Strait.

‘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,’ said Aramco chief executive Amin Nasser.

‘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 comments came just days after Qatar’s energy minister warned war in the Middle East could ‘bring down the economies of the world’.

Oil exporters including Saudi Arabia, Iraq, the UAE and Kuwait have slashed production as the closure of the Strait pushes their storage facilities to breaking point.

Anchored: Tankers laden with oil are unable to pass through the Strait of Hormuz

Even if the war ends, it will take time for oil supplies to rebound, warned Simon Flowers, chairman and chief analyst at energy consultancy Wood Mackenzie.

‘When the conflict ends, cranking up the supply chain won’t be swift,’ he said. ‘Barrels in storage at refineries or in port might be moved on vessels quite quickly. But if wells are shut-in for a prolonged period, restarting production to full output could take weeks or even longer.’

The warning came as the oil price tumbled towards $80 a barrel having soared as high as $119.50 in early trading on Monday before Trump suggested the war may be close to an end.

Stock markets bounced back with the FTSE 100 closing up 1.6 per cent at 10,412.24 – though it remains down 4.6 per cent since war erupted 11 days ago.

The Dax rose 2.4 per cent in Germany and the Cac was 1.8 per cent higher in Paris following overnight gains in Asia.

Russ Mould, investment director at AJ Bell, said Trump’s comments ‘have been seized upon’ by investors desperate for good news.

‘The market is in highly speculative mode thanks to the absence of any certainty about what the next few days, let alone weeks will look like,’ he added.

Despite the fall in the oil price, it is still up from around $70 a barrel before the US and Israel attacked Iran at the end of last month.

The surge in the price of oil is already feeding through to higher petrol prices and threatens to add hundreds of pounds to household energy bills.

And the prospect of an inflation shock has seen lenders raise mortgage rates as the war leaves Britain on the brink of a new cost of living crisis.

‘For global markets the critical issue remains the Strait of Hormuz, which remains effectively closed,’ said Ryan Djajasaputra, an economist at Investec.

‘Hundreds of tankers and cargo vessels are now either trapped in the Gulf or in limbo outside the Strait, disrupting the transit of everything from oil and gas to fertiliser and aluminium.

‘The risk is that energy prices remain elevated for some time and with it the associated macroeconomic consequences.’

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