Last week, Arab nations that include Saudi Arabia, Egypt, the UAE and Bahrain, severed diplomatic relations with Qatar citing its support for terrorism. Oil prices rose 1% as the markets reacted to the possibility of supply disruption, but pared gains later.

Impact on oil likely insignificant
Usually, geopolitical tension like these would raise oil prices from the possibility of supply disruption, but at a time when the global oil market is reeling with excessive supply, this event failed to make an impact. Further, given that Qatar’s contribution to global oil production is not very significant, it’s pulling out of the deal would not majorly disrupt the OPEC deal’s success, unless the cartel gets divided or members withdraw from the deal.

LNG prices could be impacted
It may be a small oil producer, but Qatar is an important gas supplier, contributing to around a third of the world’s supply of natural gas. If the crisis deepens, it could impact Qatar’s exports of natural gas. Qatar’s key export nations that include India, Japan, and South Korea, could be impacted by a rise in natural gas prices/reduction of Qatar’s exports.

Conflict could impact Qatar economy – and influence stock markets and corporates
Disruption in exports could drag the economy lower, impact the country’s revenues and shrink its sovereign wealth fund’s (Qatar Investment  Authority – QIA) asset base and investments. This fund is the biggest investor in Qatar’s stock market. Further, some of the fund’s investments globally include Rosneft, National Grid Plc., Volkswagen, Tiffany & Co., Barclays, and Deutsche Bank.

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