Oil, Security Pros React To Saudi Drone Attack: 'There Are No Easy Answers Here'

Jayson Derrick

Saudi Arabia suffered a drone attack over the weekend that has global implications for the oil and equity markets, as tensions in the region could escalate to the point of a military response. 

Trump: 'Locked And Loaded'

U.S. President Donald Trump said in a Tweet the administration has "reason to believe" who was behind the Saudi attacks.

The U.S. is "locked and loaded" but waiting on verification and a conversation with Saudi Arabia relating to "who they believe was the cause of this attack, and under what terms we would proceed!"

Trump may order a "proportional response" if it can be established Iran was responsible for the attack or Iranian technology was used, Robert Johnston of Eurasia Group said on an interview aired during CNBC's "Squawk Box" Monday.

While a response could be ordered against Iranian oil infrastructure as retaliation, Trump has shown a willingness to avoid escalating military tensions in the region.

"There are no easy answers here, sanctions [against Iran] are already at the maximum pressure level," he said. "We are getting closer to the military options being used — clearly the market is pricing some of that in."

Related Link: Energy Shares Up, Transports Lower In Pre-Market Trading After Attacks On Saudi Arabia

OPEC, Russia Aren't Filling The Void

Saudi Arabia's government talked over the weekend with several oil-producing countries and made the case that additional oil output isn't needed, The Wall Street Journal reported.

Saudi and OPEC officials argued other oil giants could end up pumping too much oil and said Saudi Arabia can tap its oil reserves, which is estimated at around 170 million barrels.

Russia, a non-OPEC member, said in a statement that there are enough reserves in the world. WSJ quoted the country's energy chief Alexander Novak as telling local news there is "no need to take some sort of extra urgent [measures.]

'Much More Panicky' Situation 10 Years Ago

Had the attack occurred 10 years ago, it would have been a "much more panicky situation," Dan Yergin, vice chairman at IHS Markit, also said on "Squawk Box."

Nevertheless, the drone attack is the single largest disrupting event for the oil market and begs the question: "what comes next?"

"I think we are in a new era where there is a risk premium on oil because of the demonstration on this kind of vulnerability," Yergin said.

Related Link: 3 ETFs For What Could Be A Wild Day In The Oil Patch

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