James HesterOil prices firmed after a Saudi-led coalition took the unprecedented step of severing diplomatic and economic ties with Qatar.
Saudi Arabia, Bahrain, the United Arab Emirates and Egypt issued a joint statement, suspending air and sea travel with Qatar. The former also pledged to close its land border with the emirate.
The alliance wants to isolate Qatar over its support for Iran and alleged links to Islamic terror groups in the region.
Oil rises
Brent crude futures initially leapt 1.6% to $50.74 per barrel on the news, before paring some of the early gains. Geopolitical tensions involving Iran and Saudi Arabia tend to put upward pressure on oil prices.
Around 30% of all seaborne oil passes through the neighbouring Strait of Hormuz. Qatar is also the world´s biggest exporter of liquified natural gas.
Trump visit
The unprecedented move follows Donald Trump´s visit to Saudi Arabia in May when he joined with the country´s King Salman in singling out Iran as a state-sponsor of terrorism.
Somewhat ironically, however, Qatar is home to CENTCOM, the US military´s central command in the Middle East.
Saudia Arabia claims Qatar supports terrorist groups such as the Muslim Brotherhood, Islamic State and al-Qaeda.
Elusive rally
Over recent months, oil has struggled to build on its earlier rally in the aftermath of Trump´s victory in the US general election and OPEC´s agreement to cut production.
At around the $50 per barrel mark, Brent crude is now trading at about the same level it was six months and even twelve months ago. Record high US inventories and recovering North American production have kept oil prices in check.