Qatar has been cut off on a diplomatic, and in some cases physical, basis by its Arab neighbors who believe the country is a harbor for terrorist activities. Oil prices spiked on the news, which shows how fragile the downward pressures on crude prices can be.

Saudi Arabia, Bahrain, the United Arab Emirates and Egypt severed diplomatic ties. Saudi Arabia, the largest of these countries by far, said it would close its ports to Qatar, along with airport transportation. Qatar claims the accusations are not true. Over the course of the day, the precedent set by Qatar’s neighbors could trigger diplomatic problems between it and other countries.

Qatar ranks number 14 in the world in proven oil reserves, which makes it an important enough exporter to affect prices modestly. Oil prices rose to $48 on the news, still short of a recent high of $54.

The increase in the price of crude as the Qatar situation evolves is an example of how geopolitical problems can move crude. Venezuela, the top nation in the world in crude reserves, is embroiled in troubles of political unrest and a crumbling economy. Bitter disputes and sanctions with many of the world’s nations have affected the flow of crude from Iran, which is number four in proven oil reserves. The political situation in Nigeria has been unstable for years. It ranks at number 11 in proven oil reserves.

It has been some time since a major geopolitical or national crisis has significantly pressured oil prices much higher. However, it has happened often in the past and, almost certainly, will happen again. The situation that revolves around Qatar could get worse if diplomatic ties become strained with more and more nations.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.