Oil prices surged by around 1 percent in the global markets on Monday flared by tensions in the Middle East where top crude exporter Saudi Arabia and other Arab states cut off ties with Qatar.
Saudi Arabia as well as the United Arab Emirates, Egypt, and Bahrain severed ties with top liquefied natural gas (LNG) and condensate shipper Qatar on Monday, accusing it of backing extremism and undermining regional stability.
Global benchmark Brent advanced 1.1 per cent to $50.48 a barrel. U.S. oil also climbed 1 per cent to $48.17. Dubai's stock index dropped 0.6 per cent in early trade.
Saudi Arabia cut all land air and sea contacts with Qatar “and urges all brotherly countries and companies to do the same.”
Citing “protection of national security,” Riyadh then announced it was also severing ties with Doha and closing off all land, sea and air contacts, the Saudi state agency said in a statement, cited by Reuters.
Egypt was next to join the diplomatic war, with Cairo announcing it is cutting relations with Doha, according to Sputnik news agency.
UAE has also issued a notification to Qatar citizens to leave the country within 14 days, while diplomats have been asked to exit within 48 hours.
Bahrain’s Foreign Affairs Ministry issued a statement early Monday saying it would withdraw its diplomatic mission from the Qatari capital of Doha within 48 hours and that all Qatari diplomats should leave Bahrain within the same period.
"There is not much geopolitical risk premium priced into oil right now, (but) if tensions do ratchet higher between the key OPEC producers, like Saudi Arabia, Iran and Iraq, then the market will start paying attention to this," said Virendra Chauhan, an oil analyst at consultants Energy Aspects.
With a production capacity of about 600,000 barrels per day, Qatar's crude oil output, one of OPEC's smallest, is dwarfed by the near 10 million bpd churned out by the cartels de-facto leaders.