Diplomacy

Saudi Arabia Crisis

Asian markets react to controversy

Asian markets are already responding to these political developments, and indexes in China, Hong Kong, and Australia are down by approximately 1%.

Nearly two weeks have passed since a Saudi journalist, Jamal Khashoggi, walked into the Saudi consulate in Istanbul and apparently disappeared. Turkish authorities suspect foul play, and are demanding that the Saudis present footage of Khashoggi leaving the consulate.

Saudi Arabia has remained guarded.

Major western powers, including the US, the UK, France, and Germany have expressed their concerns regarding the disappearance of Jamal Khashoggi in more or less critical tones.

This reaction has garnered a negative response from Saudi Arabia, which has threatened retaliation if the Kingdom is held responsible for the disappearance of the journalist.

In the meantime, the Future Investment Initiative summit in Riyadh is being boycotted by international media, people in the business community, and national delegations.

The tense discourse between the West and Saudi Arabia is taking its toll on the financial markets of Asia and Europe today as potential Saudi retaliation will possibly come in the form of reduced oil supply.

Although the current supply of the oil seems enough for the world, the drop in Iran and Venezuela’s output in recent weeks has made the market prone to shocks. Pundits believe that any possibility of a Saudi backlash could lead to oil prices skyrocketing.

Asian markets are already responding to these political developments, and indexes in China, Hong Kong, and Australia are down by approximately 1%—with Japan’s NIKKEI being affected the most with a 1.8% fall.

Although the ongoing tension between Saudi Arabia and the world does not fully explain the poor performance of Asian markets, there may be a butterfly effect at work.

In an attempt to resolve the situation, President Erdogan of Turkey and King Salman of Saudi Arabia held a phone conversation on October 14. The Turkish president had earlier urged the Saudi authorities to release video evidence to clarify the journalist’s fate.

However, it seems that both President Erdogan and King Salman used softer tones during this phone call, which may be a sign of their willingness to resolve the crisis at hand.