Since the President made Saudi Arabia the first stop on his inaugural foreign tour there has been a spike in interest in both the murky and troubled politics of the region as well as its likely impact on both global investment and the price of oil. Early this week several Gulf states suddenly severed diplomatic ties with Qatar, citing its alleged support for terrorism. With flights to the nation cut and a dramatic expulsion of diplomats, the tensions contributed to an oil price dip as fears grew for mounting inventories. There is also some intrigue about the actual “news value” of the $100 bn arms deal announced by President Trump during his visit, with suggestions that this was actually a memorandum of understanding rather than a deal and could take many years to be realized. The pending IPO of Saudi oil company ARAMCO looks set to open a spigot (of sorts) of Saudi capital for Western projects – in particular a $20 bn investment in Blackstone’s US infrastructure initiative.
So overall this region has been elevated to “one to watch” as it seems to have a particular allure for the Trump administration. We suggest monitoring developments in the region relating to statements on terror funding, coordinated efforts to “drive out” extremism, the impact of isolation of Iran on rhetoric and regional cohesion, Russia’s ongoing role in Syria and outcomes there that result in US intervention and the impact on the oil price.