Escalating tensions with Iran have led Saudi Arabia to officially cut diplomatic ties with Iran. In a new report, Macquarie analyst Vikas Dwivedi explains why these tensions could have a much larger impact on the oil market than people think.

What Happened?

The catalyst for the elevated tensions between the two oil producers was Saudi Arabia’s weekend execution of 48 suspected al-Qaeda terrorists. Iranian officials were outspoken in opposition to the executions.

The executions drew aggressive backlash in Tehran, where protestors attacked the Saudi embassy. The attack provoked Saudi Arabia to cut all diplomatic ties with Iran. “The event has direct negative implications for any efforts to attain peace in the two primary Shia/Sunni hotspots, including Syria and Yemen, as well as the ongoing fight against ISIS,” Dwivedi explained.

Impact On Oil Dependent On Timeframe

For oil investors, escalating tensions have…

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