Saudi Arabia and Gulf States Declare Neutrality As Oil Price Set to Soar

Saudi Arabia, the world's largest oil exporter and a key regional ally of the United States, has declared it's desire to stay out of the battle between Iran and Israel. Most of the rest of the Arab states in the region have made similar announcements as Iran has threatened to strike their oil infrastructure if Israel dares to retaliate for the ballistic missile strike last Tuesday.

Saudi Arabia, which in previous years attempted, along with the United Arab Emirates, to battle the Iranian-backed Houthi rebels in Yemen, has said it is staying out of the wars in Gaza, Lebanon and Yemen going forward. Other members of the Gulf Cooperation Council (GCC) - which includes Qatar, the United Arab Emirates, Bahrain, Oman, and Kuwait, have aslo issued joint statements this week trying to "reassure Iran of their neutrality" in the Iran-Israel conflict.

Iranian President Masoud Pezeshkian spoke with Saudi Foreign Minister Faisal bin Farhan during a visit to Doha on Thursday, saying "We consider Islamic countries, including Saudi Arabia, as our brothers, and we emphasize the importance of setting aside differences to enhance cooperation."

Bin Farhan expressed similar sentiments, saying "We aim to permanently close the chapter on our differences and focus on resolving issues, developing relations as two friendly and brotherly countries."

These words did little to cool rising tensions and the concurrent rise in oil prices.

Fears of supply disruptions if Israel attacks Iran and Iran retaliates have risen sharply in recent days, despite OPEC's estimated 5 million barrels per day (bpd) of spare production capacity.

"In theory, if we lost all Iranian production - which is not our base case - OPEC+ has enough spare capacity to make up for the shock," Amrita Sen, co-founder of consultancy Energy Aspects, told Reuters. However, another analyst said that "The effectively available spare capacity might be much lower if renewed attacks on energy infrastructure on countries in the region happen."

The big fear is that Iran will try to shut down passage through the Straights of Hormuz, which would block 20% of the world's daily supply of petroleum as well as a large percentage of liquified natural gas shipments, which many economies depend on, particularly India and Europe.

Oil market analysts regard this as a low probability event, since Iran also exports its own oil supplies through the Straights of Hormuz, but even the possibility that this could happen has already sent the price of oil up in the last few days.

Stay connected with @TBNisrael for ongoing updates about this developing situation.