Carmignac: Saudi oil attacks a reminder that central banks to not hold the key to all economic risks

The attack has damaged the heart of the Saudi processing system, therefore Saudi crude reserves are hardly relevant if they cannot be processed. However, the availability of US strategic reserves is such that short term risk to supply should probably not be overestimated (although we’ll know better in the next 48 hours how lasting the disruption to supply might last)

It is difficult to make sense of this event in the context of the apparent diplomatic progress made of the past few weeks between the US and Iran. Certainly a new headache for the Trump Administration.

The most immediate read-across of this event is the likely perception of a higher vulnerability of Saudi supply, and the heightening of political risk in the middle-East. This does not bode well for global consumer confidence, and if oil prices were to suffer a lasting “risk-premium”, for consumers’ purchasing power.

It matters to the global economic cycle, as consumer spending from Europe to the US had so far demonstrated considerable resilience to the much weakening manufacturing sector. A reminder that central banks to not hold the key to all economic risks.