Economy

Saudi Crisis Impact on Global Markets and Oil Price

Saudi Crisis Impact on Global Markets and Oil Price

The ongoing crackdown on corruption in Saudi Arabia, led by the heir apparent and Crown Prince, Mohammad Bin Salman, or Mbs, as he is known, has resulted in the price of Oil reaching its highest since 2015 and is hovering around $64 USD a Barrel. In addition, what has spooked investors around the world is that the purge has targeted Prince Alwaleed, who is the wealthiest person in the country and the 45th wealthiest in the world, with an estimated net worth of $32 Billion USD.

Is the Davos in the Desert a Mirage for Global Markets?

Coming just days after the country hosted a mega gathering of business tycoons and investors from around the world to launch the ambitious project of building a megacity called Neom by 2030, with the aim of diversifying from oil revenues and into tech and renewable energy sources, the ongoing purge has raised doubts whether Mbs, is really serious about the project.

Dubbed “Davos in the Desert” for the number of high profile investors and businesspersons who attended the gathering, the gathering was intended to signal the ambition of Mbs and to assure the world that Saudi is indeed entering a new era. However, the ongoing arrests have made investors nervous since Prince Alwaleed, who is a global investor with stakes in Twitter, Citigroup, and Facebook, was widely seen as the person who could perhaps help modernize the country. This means that the Davos in the Desert can well turn out to be a mirage as some analyst have pointed out.

A Blessing in Disguise for the Oil Price

Having said that, the sudden moves have helped the price of Oil to rise due to geopolitical uncertainty as well as concerns that any disturbance in Saudi would likely to lead to repercussions in the wider Middle East region. Thus, whether intended or otherwise, the fact that Oil prices are rising can be a blessing in disguise for the Saudi economy reeling under recessionary conditions.

A Silver Lining for the Saudi Economy

The clouds of impending chaos in Saudi have a silver lining in that the crackdown is seen by some investors as being overdue to tackle the rampant corruption that is prevalent at all levels of the country. Moreover, the fact that Mbs is targeting those at the top indicates that he is indeed playing big. It remains to be seen as to how well this is received by global investors in the days to come.

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