Saudi Aramco has approved a $3 billion share buyback program and proposed an increased dividend, aiming to reinforce market confidence following operational disruptions linked to escalating tensions in the Middle East. This unexpected move—the company’s first share repurchase since its 2019 stock market debut—comes amid a series of recent challenges, including reduced oil output and the temporary shutdown of its largest refinery in Saudi Arabia after a drone attack.
Strategic Response to Regional Disruption
The company is urgently rerouting some exports as the Strait of Hormuz remains nearly paralyzed. While oil prices surged sharply—briefly surpassing $100 per barrel on Monday—the spike may help offset the financial impact of lower production. Prices later retreated after former U.S. President Donald Trump suggested the conflict with Iran could end soon.
Dividend Hike Bolsters State Finances
Aramco announced its base dividend for the quarter ended 31 December will rise to $21.9 billion—a 3.5% increase from the previous quarter. The move directly benefits the Saudi government and the Public Investment Fund (PIF), which together hold around 97% of the company’s shares. Riyadh relies heavily on Aramco’s massive dividend payouts to fund its multi-trillion-dollar economic diversification plan, Vision 2030.
Strong Cash Flow Supports Payouts
Free cash flow—the capital remaining after operating expenses and investments—reached $27.5 billion for the quarter, covering the total dividend for the second consecutive period, after a prolonged stretch where it had fallen short. The company plans to buy back up to 350 million common shares over 18 months, beginning in March. Repurchased shares may be held for up to 10 years.
Broader Market Context
Aramco’s shares have risen about 14% this year, though they’ve underperformed peers such as Shell, ExxonMobil, and Chevron. In contrast, BP recently suspended its own share buybacks to strengthen its balance sheet.
The near-closure of the Strait of Hormuz has created a crisis for the global energy sector, severely constraining exports. Storage tanks are filling rapidly, prompting other major OPEC producers—including Iran, Kuwait, and the United Arab Emirates—to also cut oil output.