War Drums in the Middle East will cause Oil Prices to Increase, Saudis to work with Israelis
Over the last month we have be discussing the events in Saudi Arabia with the new Crown Prince Mohammed bin Salman (MBS). The Crown Prince is out to modernize Saudi Arabia. He is young and wants things to happen quickly. One of the first things he did was to cut off relations with Qatar over their support of terrorism and Iran. In recent weeks, he has arrested a large number of very wealthy Saudi citizens on corruption charges. MBS then forced the Prime Minister of Lebanon to resign and asked Saudi citizens to leave Lebanon at once. Although that has now been reversed things are clearly in flux.
Over the last decade, Saudi’s enemy Iran has slowly encircled Saudi Arabia. Iran is moving into Yemen to the south, southern Iraq to the east, and Syria and Lebanon to the north. Now Saudi Arabia realizes that they are close to being strategically surrounded, and that they had better do something. That something is what is pushing oil prices higher. The Saudi’s are now talking to the Israelis about sharing intelligence.
Both Saudi Arabia and Israel are threatened by Iran and are now moving to stop Iran. The tentative alliance of Saudi Arabia and Israel is a warning sign of potential war with Iran ahead. This is very bullish for oil and I believe it to be a bigger flash point than North Korea. Year to date the energy sector is down about 11.6%. We could see that start to change.