In November of 2014, we announced the quiet death of the petrodollar.
The system which underwrote decades of dollar dominance and kept a perpetual bid under USD assets met an untimely demise when the Saudis moved to bankrupt the US shale complex by deliberately suppressing oil prices.
The implications, we said, would be far-reaching.
March will mark a year since Saudi Arabia began its air campaign in Yemen, where Iran-backed militiamen drove President Abd Rabbuh Mansur Hadi into exile in Riyadh.
The Houthi advance was a decidedly unwelcome event for the Saudis who aren’t keen on permitting Tehran to establish what would amount to an Iranian colony with a cozy view of the Bab-el-Mandeb on the kingdom’s southern border.
On Monday, we brought you “Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos,” in which we outlined the jump in riyal forwards and widening of CDS spreads that Riyadh witnessed in the aftermath of the kingdom’s move to cut diplomatic ties with Iran.
Hours ago, in the latest sign that tensions between Riyadh and Tehran are set to spiral into a full blown diplomatic crisis of historic proportions, Saudi Foreign Minister Adel Al-Ahmad Al-Jubeir announced that the kingdom has cut diplomatic ties with the Iranians. The Iran mission was ordered to leave Saudi Arabia within 48 hours.
Al-Jubeir went on to accuse Iran of stoking sectarian violence in the region (a contention that represents the worst kind of hypocrisy) and suggested Riyadh may need to do more to counter the expansion of Iranian influence.
Earlier today, as Iranian police struggled to disperse protesters gathered outside the Saudi consulate in Mashhad, we said the following about the rapidly deteriorating situation: