As oil prices tumble to four-year lows, volatility exposes the fragile balance between geopolitics, supply gluts, and shifting global demand. Tariffs, recession fears, and Middle East tensions are failing to lift prices, marking a new era of uncertainty for the oil market. Saudi Aramco, the bellwether of the region, faces shrinking revenues and tightening dividends, all while funding Vision 2030’s bold diversification agenda. This report delves into the pressure points that OPEC and particularly Saudi Aramco need to face—and what they signal for the energy future of the Gulf.
The Evolution of Oil Prices Amid Recent Geopolitical Tensions
Recently, oil prices have experienced a high volatility and hit their lowest levels in four years. More specifically, on April 8th, crude oil prices hit a low of $58.60 per barrel, before bouncing back and stabilising around $66.
This downturn reflects a broader market sentiment shaped by weakening global demand, rising inventories, and geopolitical uncertainty mainly related to U.S tariffs and middle east conflicts.
Source 1: Evolution of WTI Spot Prices in USD (Source: Bloomberg)
The impact on tariffs
While the price for crude benchmarks have been declining steadily since Trump returned to office in mid-January, his tariffs announcement of April 2 saw it plunge to its lowest level in four years. The retaliatory nature of the US-China trade war—marked by tit-for-tat tariffs—has injected deep uncertainty into global trade flows, dampening business confidence and investment. As two of the world’s largest economies slow down, fears of reduced industrial output and consumer demand ripple through commodity markets. Oil, closely tied to economic activity, suffers as traders price in lower transportation and manufacturing needs. This uncertainty amplifies existing bearish sentiment, turning market caution into a sustained drag on prices.
In fact, while crude oil itself was not directly taxed, the broader economic uncertainty triggered by reciprocal tariffs, especially on industrial goods, between the U.S. and China reduced global growth prospects and energy consumption. The International Energy Agency (IEA) lowered its 2025 oil demand growth projection from 1.03 million barrels per day (b/d) to 730,000 b/d due to reduced confidence and spending, particularly in the US and China. Meanwhile, Saudi-led OPEC+ increased production, adding pressure on prices. At the same time, U.S. shale producers began slowing down, with the IEA cutting U.S. growth by 150,000 b/d, citing higher costs and weak price incentives.
Impact of Middle east conflicts
Although historically middle east conflicts have often threatened the supply of oil determining higher prices, despite ongoing conflicts involving also countries such as Iran and Iraq, two of the greatest oil producers in the world, the prices seem not to be that affected. This paradox can be attributed to several key factors that have outweighed the traditional impact of Middle East conflicts on global oil markets. For instance, OPEC+ producers have increased oil production, with plans to raise output by 2.2 million barrels per day over the next 18 months. Additionally, non-OPEC producers, particularly U.S. shale producers, have contributed to a global supply surplus. This oversupply has exerted downward pressure on prices, even amid geopolitical tensions. Therefore, we can infer the market is increasingly more resilient to geopolitical risks, possibly due to diversified supply sources and strategic reserves.
In conclusion, despite the ongoing conflicts in the Middle East, oil prices have remained under significant pressure, largely due to factors like the global trade war, economic slowdown, and oversupply in the market. While geopolitical tensions have historically spiked oil prices due to fears of supply disruptions, recent events such as increased production by OPEC+ and the growth of U.S. shale oil have led to a surplus that has kept prices low. The global economic uncertainties, amplified by tariff wars and reduced demand forecasts, have further contributed to the drop in oil prices.
While the price for crude benchmarks have been declining steadily since Trump returned to office in mid-January, his tariffs announcement of April 2 saw it plunge to its lowest level in four years. The retaliatory nature of the US-China trade war—marked by tit-for-tat tariffs—has injected deep uncertainty into global trade flows, dampening business confidence and investment. As two of the world’s largest economies slow down, fears of reduced industrial output and consumer demand ripple through commodity markets. Oil, closely tied to economic activity, suffers as traders price in lower transportation and manufacturing needs. This uncertainty amplifies existing bearish sentiment, turning market caution into a sustained drag on prices.
In fact, while crude oil itself was not directly taxed, the broader economic uncertainty triggered by reciprocal tariffs, especially on industrial goods, between the U.S. and China reduced global growth prospects and energy consumption. The International Energy Agency (IEA) lowered its 2025 oil demand growth projection from 1.03 million barrels per day (b/d) to 730,000 b/d due to reduced confidence and spending, particularly in the US and China. Meanwhile, Saudi-led OPEC+ increased production, adding pressure on prices. At the same time, U.S. shale producers began slowing down, with the IEA cutting U.S. growth by 150,000 b/d, citing higher costs and weak price incentives.
Impact of Middle east conflicts
Although historically middle east conflicts have often threatened the supply of oil determining higher prices, despite ongoing conflicts involving also countries such as Iran and Iraq, two of the greatest oil producers in the world, the prices seem not to be that affected. This paradox can be attributed to several key factors that have outweighed the traditional impact of Middle East conflicts on global oil markets. For instance, OPEC+ producers have increased oil production, with plans to raise output by 2.2 million barrels per day over the next 18 months. Additionally, non-OPEC producers, particularly U.S. shale producers, have contributed to a global supply surplus. This oversupply has exerted downward pressure on prices, even amid geopolitical tensions. Therefore, we can infer the market is increasingly more resilient to geopolitical risks, possibly due to diversified supply sources and strategic reserves.
In conclusion, despite the ongoing conflicts in the Middle East, oil prices have remained under significant pressure, largely due to factors like the global trade war, economic slowdown, and oversupply in the market. While geopolitical tensions have historically spiked oil prices due to fears of supply disruptions, recent events such as increased production by OPEC+ and the growth of U.S. shale oil have led to a surplus that has kept prices low. The global economic uncertainties, amplified by tariff wars and reduced demand forecasts, have further contributed to the drop in oil prices.
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The evolution of the global oil market, from the establishment of OPEC onwards to volatility in worldwide demand and endemic geopolitical instability, is indispensable background to understand the problems Saudi Aramco is facing today. As oil’s largest oil producer, Aramco is highly exposed to fluctuations in oil prices and supply-demand balances. The recent fall in oil prices demonstrates the challenges even the most dominant oil companies face in a volatile market.
Aramco in Context: The Benchmark for Middle East Oil Producers
The Saudi Arabian Oil Company (Saudi Aramco), as the world’s largest oil producer and most valuable energy company offers a clear study of how price trends impact Middle East oil companies’ financials and strategy. Aramco is a state-owned giant which accounts for roughly 10% of global oil supply, they produce five grades of crude oil: Arabian Heavy, Arabian Medium, Arabian Light, Arabian Extra Light, and Arabian Super Light.
World-wide its largest competitors include the likes of ExxonMobil, Chevron Corporation and Shell Plc. Comparison to similar Middle Eastern state-owned companies is not possible due to the majority of them not being publicly listed (ADNOC, QatarEnergy, Kuwait Petroleum). Therefore, we are going to compare the largest Middle Eastern publicly-traded companies in Oil and Gas Exploration and Production to Aramco, such as Newmed Energy LP, Delek Group Ltd., and Energean Plc.
Source 2: Comparison of Aramco’s Financials on a Global and Regional Perspective (Source: Factset)
As observed by the table above, Aramco leads both globally and regionally, however its 2024 revenues have decreased slightly. The trend of stunned revenues is seen to be common amongst most competitors, with exceptions.
Tariffs, Recession Fears, and the Price Shock
The recent oil downturn has directly hit Aramco’s earnings, government revenues, and market valuation. Bloomberg Intelligence estimates that the slide in oil prices will cut Aramco’s 2025 net revenue by over $30 billion relative to prior forecasts. This reflects the impact of a minor price drop on dollar for a company pumping ~9 million barrels per day (Mbpd). Investor sentiment has also suffered: earlier this month, Aramco’s market capitalization shrank by $88 billion in a single week as oil futures plunged on US recession fears, stemmed from tariff news coming from the White House on the second of April. As the world’s largest consumer of oil, fears of an economic slowdown in the US lead to lower expectations in energy consumption, industrial activity and transportation, impacting the oil market and its incumbents. Aramco’s stock fell over 5% (on April 6), its worst one-day decline since the March 2020 pandemic panic. These market reactions underscore the leverage of Aramco’s value to oil price expectations.
Tariffs, Recession Fears, and the Price Shock
The recent oil downturn has directly hit Aramco’s earnings, government revenues, and market valuation. Bloomberg Intelligence estimates that the slide in oil prices will cut Aramco’s 2025 net revenue by over $30 billion relative to prior forecasts. This reflects the impact of a minor price drop on dollar for a company pumping ~9 million barrels per day (Mbpd). Investor sentiment has also suffered: earlier this month, Aramco’s market capitalization shrank by $88 billion in a single week as oil futures plunged on US recession fears, stemmed from tariff news coming from the White House on the second of April. As the world’s largest consumer of oil, fears of an economic slowdown in the US lead to lower expectations in energy consumption, industrial activity and transportation, impacting the oil market and its incumbents. Aramco’s stock fell over 5% (on April 6), its worst one-day decline since the March 2020 pandemic panic. These market reactions underscore the leverage of Aramco’s value to oil price expectations.
Source 3: Normalized Price Trends – Aramco vs Brent Crude Spot (Source: Facset)
This chart compares the relative price movement of Saudi Aramco stock and Brent crude oil from April 2024 to March 2025, with both prices indexed to 100. The correlation of Aramco’s stock to oil is 0.66 so it generally moves in the direction of oil, however it is somewhat insulated from extreme volatility. This is likely due to Aramco’s state-support, while oil suffers sensitivity due to tariffs and OPEC+ output surprises.
Holding the Premium: P/E Ratios and Dividend Re-adjustment
Taking a look at Aramco’s profitability, Aramco’s valuation premium appears to be fading amid lower oil prices. If we compare Price-to-Earnings ratios across the oil and gas industry, we notice that Aramco’s premium is moving inversely compared to its global competitors, while in the regional landscape, changes in P/E are scattered amongst the board.
Holding the Premium: P/E Ratios and Dividend Re-adjustment
Taking a look at Aramco’s profitability, Aramco’s valuation premium appears to be fading amid lower oil prices. If we compare Price-to-Earnings ratios across the oil and gas industry, we notice that Aramco’s premium is moving inversely compared to its global competitors, while in the regional landscape, changes in P/E are scattered amongst the board.
Source 4: Comparison of Aramco’s Multiples on a Global and Regional Perspective (Source: Factset)
The main takeaways from the above tables can be summed up as being that Aramco, relative to its peers, did not experience any sharp P/E swings. It also trades at a higher P/E compared to both its global and regional peers, signifying potential confidence in its low cost structure.
However, lower oil prices have forced Aramco to adjust its financial policies, especially dividends. At IPO, Aramco pledged a $75 billion annual base dividend. In 2023–2024, it introduced a performance-linked dividend to distribute surplus cash during high-price periods. With the recent slump, that bonus has shrunk significantly. Aramco’s total planned 2025 payout of $85.4 billion is almost entirely composed of the base dividend (raised 4% to $84.6B), with little room for extras. This indicates a “significantly lower performance-linked dividend” in the current environment.
Now, almost all of Aramco’s earnings will be expensed to cover its promised base shareholder payout, tightening its financial framework. Despite relatively low leverage and a strong balance sheet relative to Western oil majors, Aramco must be prudent. Yet, amid a cash flow squeeze, Aramco has decided to progress its plans to partner with Sinopec and Yasref in a joint venture petrochemical expansion. These downstream moves hedge against oil price volatility by capturing value across the barrel-to-chemicals chain and meeting growing fuel demand in Asia. The firm is also doubling its refining capacity (targeting 8–10 Mbpd refining throughput from ~5 Mbpd). This trend of diversifying energy sources is being explored along the kingdom.
Scaling Back to Diversify Forward
Interestingly, in September 2024, Aramco halted its plan to boost maximum oil production capacity from 12 to 13 million barrels per day. This expansion, which would have cost an estimated $40 billion, was paused to avoid excess spending when the company already produces below its current capacity. At recent output levels (~9 Mbpd), Aramco is maintaining nearly 3 Mbpd of spare capacity, the largest buffer of any producer. That spare capacity gives Aramco a strategic edge as it can ramp up output quickly if needed. The decision to suspend the 1 Mbpd capacity expansion is thus a “sound plan”, freeing up capital for other uses. Indeed, Aramco indicated the up to $40B saved will be redirected into Saudi Arabia’s Vision 2030 diversification projects, aligning with national goals to reduce reliance on oil.
Despite short-term cutbacks, Aramco’s core strengths position it for resilience. The company benefits from a globally unmatched low cost of production (estimated at only a few dollars per barrel) and high-quality reservoirs, ensuring it remains profitable even at modest oil prices. Additionally, Aramco is leveraging its financial might to diversify within hydrocarbons: it is expanding natural gas and Liquid Natural Gas (LNG) ventures to meet rising gas demand integrating Aramco further into the LNG trade.
However, lower oil prices have forced Aramco to adjust its financial policies, especially dividends. At IPO, Aramco pledged a $75 billion annual base dividend. In 2023–2024, it introduced a performance-linked dividend to distribute surplus cash during high-price periods. With the recent slump, that bonus has shrunk significantly. Aramco’s total planned 2025 payout of $85.4 billion is almost entirely composed of the base dividend (raised 4% to $84.6B), with little room for extras. This indicates a “significantly lower performance-linked dividend” in the current environment.
Now, almost all of Aramco’s earnings will be expensed to cover its promised base shareholder payout, tightening its financial framework. Despite relatively low leverage and a strong balance sheet relative to Western oil majors, Aramco must be prudent. Yet, amid a cash flow squeeze, Aramco has decided to progress its plans to partner with Sinopec and Yasref in a joint venture petrochemical expansion. These downstream moves hedge against oil price volatility by capturing value across the barrel-to-chemicals chain and meeting growing fuel demand in Asia. The firm is also doubling its refining capacity (targeting 8–10 Mbpd refining throughput from ~5 Mbpd). This trend of diversifying energy sources is being explored along the kingdom.
Scaling Back to Diversify Forward
Interestingly, in September 2024, Aramco halted its plan to boost maximum oil production capacity from 12 to 13 million barrels per day. This expansion, which would have cost an estimated $40 billion, was paused to avoid excess spending when the company already produces below its current capacity. At recent output levels (~9 Mbpd), Aramco is maintaining nearly 3 Mbpd of spare capacity, the largest buffer of any producer. That spare capacity gives Aramco a strategic edge as it can ramp up output quickly if needed. The decision to suspend the 1 Mbpd capacity expansion is thus a “sound plan”, freeing up capital for other uses. Indeed, Aramco indicated the up to $40B saved will be redirected into Saudi Arabia’s Vision 2030 diversification projects, aligning with national goals to reduce reliance on oil.
Despite short-term cutbacks, Aramco’s core strengths position it for resilience. The company benefits from a globally unmatched low cost of production (estimated at only a few dollars per barrel) and high-quality reservoirs, ensuring it remains profitable even at modest oil prices. Additionally, Aramco is leveraging its financial might to diversify within hydrocarbons: it is expanding natural gas and Liquid Natural Gas (LNG) ventures to meet rising gas demand integrating Aramco further into the LNG trade.
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The case of Saudi Aramco’s remarkable influence on the oil market highlights how indispensable the commodity has become to Middle Eastern economies over the past decades. However, escalating global energy transitions, price volatility, geopolitical tensions, and emerging pressures like trade tariffs have pushed countries such as Saudi Arabia to urgently diversify. The launch of Saudi Arabia’s Vision 2030 marks a visible commitment to this shift, but recent oil market turbulence is testing the feasibility of these ambitions across the region.
Vision 2030: “An Ambitious Vision for an Ambitious Nation”
In 2016, Saudi Arabia's Crown Prince Mohammed bin Salman (MBS) unveiled Vision 2030, a comprehensive plan to transform the Kingdom into a global investment powerhouse, diversify its economy, and primarily reduce its heavy reliance on oil. Major pillars of the plan include boosting non-oil industries like tourism, technology, health, and entertainment, and building megaprojects like NEOM. This requires thorough investigation into sustainability and resilience factors at the core of every national action.
The Kingdom has mobilised extensive institutional support. At the national level, it established the National Risk Council to ensure resilience, overlooks the financial sector via Saudi Central Bank, and strengthens the effort with the National Cybersecurity Authority and the Digital Government Authority. Besides, the government expects to attract foreign investment and create new revenue streams by expanding the Public Investment Fund, leveraging sports and entertainment (for a better global image), and integrating women into the workforce (for a more competitive labour market). Above all, the strongest emphasis is placed on reducing oil reliance through actively investing in renewable energy and manufacturing, hoping to source at least 50% of power from renewable energy (solar and wind) by 2030.
The careful planning has paid off since the launching of Vision 2030: non-oil revenues grew from $163 billion to $411 billion by 2022, according to KPMG, and are projected to reach $1 trillion by 2030 (currently accounts for 16% of the GDP with the aim of reaching the 50% threshold in 2030). However, current developments in the oil market pose significant challenges to sustaining this momentum.
However, despite diversification efforts, Saudi Arabia remains heavily dependent on oil revenues to fund its projects. Any sharp decline in oil prices directly impacts the government's budget and its ability to invest in Vision 2030 initiatives. In fact, the Kingdom is under way to boost domestic infrastructure investments for the above-mentioned proposals, making it more vulnerable to swings in oil prices. To this extent, Brent crude oil prices recently hit their lowest point in four years, with fears that it could severely affect Saudi Arabia's fiscal position. Prolonged price weakness could significantly affect Saudi Arabia’s fiscal position, reportedly forcing a scale-down of the NEOM project in both size and ambition. Indeed, according to Reuters, the International Monetary Fund (IMF) has lowered its 2025 GDP growth projection for Saudi Arabia to 3.3%, mainly due to extended oil production cuts among the OPEC+ member states, while also trimming its forecast for 2026. In defense of the disappointing estimates, Finance Minister Mohammed al Jadaan assures that the focus is not placed on overall GDP but on non-oil GDP which has shown healthy growth in the past few years.
Solar Energy: A Suitable Alternative?
As part of Vision 2030, Saudi businesses are increasingly turning to solar energy. The phase-out of electricity subsidies since 2018 alongside cheaper photovoltaic panels has made rooftop solar installations financially attractive across sectors like healthcare, logistics, and retail. Companies such as Fakeeh Care and Tamer Group witness significant utility cost savings after adopting solar panels, although full return on investment can span decades. Additionally, multinational parent companies like Ikea and GSK are pushing local Saudi operations to meet global sustainability targets, further accelerating solar adoption. Lower costs from Chinese-made solar technology and a surge in greenfield investments from China have supported this transition. Experts highlight that Crown Prince MBS’s economic reforms, including energy subsidy cuts and diversification policies, are the true catalysts, making renewable energy adoption both an economic and strategic necessity for Saudi firms aiming to align with global supply chain standards and reduce long-term costs.
Regional Impact: Diversification Beyond Saudi Arabia
Source 5: Renewable Energy Target by Country (Source: RG Report)
Saudi Arabia is not alone in its diversification efforts. The United Arab Emirates (UAE) has aggressively diversified into finance, tourism, and renewable energy, with Dubai’s resilient economy as a notable success story. Similarly, Qatar has been expanding its investments into education and sports, notably hosting the 2022 FIFA World Cup. Earlier this year, Kuwait also announced significant infrastructure spending in 2025-2026 for rail, roads, water, electricity, and the Grand Mubarak Port construction, allocating nearly $6 billion to increase growth rates, expand the private sector’s role in the economy, and boost non-oil revenues.
Oman and Bahrain, though more vulnerable due to smaller financial reserves, have also adopted long-term plans to boost tourism, manufacturing, and logistics industries. With regards to Oman, the country is bracing itself for the Eleventh Five-Year Plan (2026-2030), a pivotal step in the journey towards achieving the Oman Vision 2040 goals. As per the latter, Bahrain launched its Economic Vision 2030 in 2008 whose core objective is to stray away from hydrocarbons revenue by developing high-productivity, high-value sectors.
Nevertheless, these countries face similar challenges: the urgency to diversify is clashing with short-term revenue shortages caused by fluctuating oil prices, and the competition among them for foreign investment is intense.
By Anh To Vu, Nicolò Giuliani, Pietro Nicolazzi
Sources:
Oman and Bahrain, though more vulnerable due to smaller financial reserves, have also adopted long-term plans to boost tourism, manufacturing, and logistics industries. With regards to Oman, the country is bracing itself for the Eleventh Five-Year Plan (2026-2030), a pivotal step in the journey towards achieving the Oman Vision 2040 goals. As per the latter, Bahrain launched its Economic Vision 2030 in 2008 whose core objective is to stray away from hydrocarbons revenue by developing high-productivity, high-value sectors.
Nevertheless, these countries face similar challenges: the urgency to diversify is clashing with short-term revenue shortages caused by fluctuating oil prices, and the competition among them for foreign investment is intense.
By Anh To Vu, Nicolò Giuliani, Pietro Nicolazzi
Sources:
- Bloomberg
- Bloomberg Intelligence
- FactSet
- Financial Times
- The Wall Street Journal
- Yahoo Finance
- Saudi Arabian Government
- IEA
- The BCI
- Smart Water Magazine
- ZAWYA
- Oxford Business Group
- Center on Global Energy Policy at COLUMBIA | SIPA
- UAE Government
- Oman Observer
- Bahrain Government
- Reuters