Responding to the torching of its Tehran embassy, yesterday Saudi Arabia cut its diplomatic ties to Iran. A ripple effect is taking place today in pro-Saudi nations. The BBC reports:
A number of Saudi Arabia’s allies have joined diplomatic action against Iran after the Saudi embassy in Tehran was attacked amid a row over the execution of a Shia Muslim cleric. Bahrain and Sudan have both severed relations with Iran, and the UAE has downgraded its diplomatic team.
Saudi Arabia on Sunday severed ties and gave Iran’s diplomats two days to go. Saudi Arabia and Iran are the key Sunni and Shia powers in the region and back opposing sides in Syria and Yemen. Bahrain, which is ruled by a Sunni monarchy but has a majority Shia population, on Monday gave Iranian diplomats 48 hours to leave the country.
The turmoil is having an effect of the world’s oil markets:
Oil prices were volatile Monday after Saudi Arabia severed diplomatic ties with Iran. After spiking by nearly 3% in early trading, crude prices retreated to $37 before rebounding yet again. Both Iran and Saudi Arabia are major oil-producing countries, and founding members of OPEC.
Geopolitical tensions in the Middle East typically cause prices to spike as traders worry about supply disruptions. But in this case, both Iran and Saudi Arabia are likely to keep pumping oil at a breakneck pace, contributing to the global supply glut that has kept prices at very low levels in recent months.