Oil prices worldwide surged Monday, with U.S. crude oil futures (CL=F) climbing as much as 14% as investors gauged the impact from Saturday’s attack on Saudi Arabia’s oil infrastructure.
Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute, said the attack looks like a direct Iranian strike. “They’ve been trying to use maximum resistance, this calibrated campaign to create pressure on the U.S. to lift sanctions and they needed to escalate,” Ibish said.
A Saudi government official said debris and wreckage from the devices used to attack the Saudi oil targets “belongs to the Iranian regime,” but stopped short of accusing Iran of launching the attack.
President Trump tweeted over the weekend that the U.S. was “locked and loaded depending on verification,” but was waiting to hear from the Saudi Government as to who they believed caused the attack.”
Iran’s foreign ministry called U.S. allegations that it was involved in the attack unacceptable and baseless, “Accusing Iran of the attacks is in line with the U.S.’s maximum lies policy.”
Remember when Iran shot down a drone, saying knowingly that it was in their “airspace” when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a very big lie. Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?— Donald J. Trump (@realDonaldTrump) September 16, 2019
Trump responded to Iran’s denial Monday tweeting, “Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?”
Military escalation or diplomatic resolution
Ibish told Yahoo Finance’s On the Move that Iran, hurt by sanctions which limit its ability to sell oil, may have overstepped. “They have done something that affects the whole global oil market that directly challenges the United States and economy of Saudi Arabia. It is an attack on the global oil market and the global oil infrastructure. And there is the potential for a global response to Iran at the diplomatic level,” he said.
Stability in the Middle East as well as “deterrence need to be restored,” according to Ibish, “ and that may require some kind of military response here.”
U.S. Energy Secretary Rick Perry told CNBC, “It is a time for a coalition of tame and thoughtful energy-producing and energy-consuming countries to come together and put a stop to Iran’s malign activity.” His comments come a day before the U.N. General Assembly 2019 session opens Tuesday in New York City with high-level general debate scheduled to begin September 24.
Disrupting the international oil trade is an objective of Iran’s, according to Ibish. “It really is kind of an act of almost taking part of the global market hostage at least for a few days in order to make their point.”
Ibish warns that a failure to hold Iran accountable for the attack will guarantee that it will happen again. “They are going to escalate again no question,” he said.
Adam Shapiro is co-anchor of Yahoo Finance On the Move.