The global equity investor community is now somewhat cautious because of the aggressive rally in oil prices that totalled 14% since the drone strikes on Saudi production facilities that stopped 50% of the Kingdom’s production for a short period – some facilities are now running again. This is the largest production facility in the world and with the output cut in half, shock waves were sent around the globe. At the open of Tokyo on Tuesday, equity markets trade somewhat lower but for the most part, were more a stance by investors that read caution, now fear.
The sharp move in oil prices and the response in equity markets came after a series of drone attacks on the largest oil processing facility in the world – which is in Saudi Arabia. Iran is being blamed but for now that has not be confirmed. The Trump administration has blamed Iran and the government of the Kingdom of Saudi Arabia has said that Iranian weapons were used – we should take them on their word, I suppose. The entire spare capacity of the world output of oil has been taken out in one attacks and the US repose is that the US will use its strategic supplies in storage facilities. This could be the first of a series of disruptions of oil prices.