INTERNATIONAL – The Saudi-US diplomatic clash over the disappearance of journalist Jamal Khashoggi is stirring memories of the most traumatic event in the history of oil.
Crude prices jumped this morning after Saudi Arabia vowed to hit back at any punitive measures against it following a White House warning that President Donald Trump may take “stern action” should the kingdom be found responsible for Khashoggi’s demise.
Traders interpreted that as a veiled threat the world’s biggest exporter could deploy its “oil weapon” – by cutting supplies to the US The only time that option was used was the 1973 oil embargo to protest Western support of Israel.
The US is increasingly convinced that Khashoggi, a Washington Post writer and critic of Riyadh, died after entering the Saudi consulate on October 2. Turkish officials have said they believe he was murdered and his body dismembered. The Saudi king has ordered an internal investigation.
The heightening US-Saudi tensions are fueling unease about a global economy nervous over Trump’s threat to impose more tariffs on China. The last oil embargo sparked a global recession and ultimately undermined Middle East producers as the West sought new supplies and technologies.
Today’s price surge quickly eased, suggesting traders believe that, behind the heated words, oil producers are in no rush to repeat the mistakes of the past.