RBC Capital Markets, a major investment bank, has revised its profit forecasts for Saudi Aramco ahead of the oil giant's August 4th earnings call. The adjustments come after fresh disruption in the Strait of Hormuz, a critical chokepoint for global oil shipments, put the company's export volumes back under the microscope.
The analyst firm lowered its fiscal year 2026 earnings per share (EPS) estimate for Aramco, citing the renewed closure of the strait. However, it lifted its FY27 projections, pointing to stronger refining margins that could offset some of the near-term pain.
What the Strait of Hormuz Means for Aramco
The Strait of Hormuz, a narrow waterway between Iran and Oman, is one of the most strategically important oil transit points in the world. Roughly 20% of all global oil consumption passes through it daily. For Saudi Aramco, which exports the vast majority of its crude from terminals on the Persian Gulf, any disruption there directly threatens its ability to ship oil to customers in Asia, Europe, and beyond.
Recent tensions in the region have led to a re-closure of the strait, reigniting fears of supply bottlenecks. While the situation remains fluid, RBC's move suggests the bank expects the disruption to weigh on Aramco's near-term production and sales volumes. That would directly hit revenue and profits, since Aramco's earnings are heavily tied to the volume of oil it can sell and the price it fetches.
For context, Aramco's second-quarter profit was expected to jump 40% on higher oil prices, as earlier reports indicated. But the Strait of Hormuz issue introduces a new variable that could complicate that picture for the rest of the year.
Why Refining Margins Matter for FY27
RBC's decision to lift FY27 estimates, despite the near-term headwind, points to a different part of Aramco's business: refining. The company operates a vast network of refineries, both in Saudi Arabia and abroad, that turn crude oil into gasoline, diesel, and other products. When refining margins—the difference between the cost of crude and the price of refined products—are strong, Aramco can earn more from each barrel it processes.
The bank's view suggests that while crude exports may face disruption, Aramco's downstream operations could benefit from tighter global product markets. This is a reminder that Aramco is not just a pure oil producer; it is an integrated energy giant with multiple profit levers.
Investors will be watching the August 4th call for details on how management plans to navigate the dual pressures of geopolitical risk and refining economics. Key questions are likely to include: How much production capacity is currently idle due to the strait closure? Are there alternative export routes, such as the East-West pipeline that bypasses Hormuz? And how sustainable are the strong refining margins?
What It Means for Investors
For everyday investors, the RBC forecast adjustment is a signal that even the world's largest oil company is not immune to geopolitical shocks. Aramco's stock, which trades on the Saudi stock exchange and is also available via some international ETFs, has long been seen as a bet on stable oil demand and Saudi Arabia's low-cost production. But the Strait of Hormuz disruption introduces a layer of uncertainty that could affect near-term earnings and dividend payouts.
Aramco's dividend is a key attraction for many investors, as the company has committed to a base dividend of $75 billion per year, plus performance-linked payouts. If export volumes fall, that could pressure cash flow and potentially the dividend, though the company has substantial financial reserves to weather short-term disruptions.
RBC's move also highlights the importance of looking beyond headline oil prices. While crude prices have risen amid the Hormuz tensions—as recent coverage noted—the actual impact on a company like Aramco depends on its ability to ship and refine that oil. Investors should watch for updates on shipping routes and any ceasefire developments that could reopen the strait.
The broader earnings season context is also relevant. As other reports have shown, corporate results are increasingly uneven, with some companies benefiting from tailwinds while others face headwinds. Aramco's August 4th call will be a key test of how energy giants are navigating this complex environment.
In the meantime, RBC's dual adjustment—lowering FY26 while raising FY27—suggests the bank sees the current disruption as temporary but significant, with a recovery expected next year. Investors should treat the August 4th earnings call as a critical moment to gauge whether that view is realistic or overly optimistic.
