Wondering why Saudi Arabia is so fussed about Bahrain?
JBC Energy encapsulates the reason in one helpful chart:
Most of Saudi Arabia’s chief producing fields are right around the corner.
As the analysts noted on Wednesday (our emphasis):
While stability in Libya is seemingly still far away, the market is now also eying countries like Iran, Iraq and Saudi Arabia more closely. With King Abdullah in the latter generously allocating financial aid, stability in OPEC’s largest oil exporter seems to be more bought than fundamentally established. It is true that the country has a high per capita GDP rate close to $18,000 (IMF) but the major problem is similar to other countries in the region: “the majority of the Arab population is under 25 and the unemployment rate for young adults is in most countries 20% or more” Prince Al-Waleed bin Talal Al Saud put in an article in New York Times last week.
The billionaire nephew of the Saudi King warns: “unless Arab governments adopt radically different policies, their countries will very likely experience more political and civil unrest”. The recent unrest in Bahrain is therefore of particular importance for Saudi Arabia as the small country is surrounded by the vast majority of Saudi oil production (see map). Consequently, unrest in this region can have fatal consequences for the world. If stock market sentiment can be taken as a sounding board for the region then the 7% plunge yesterday on the Saudi stock exchange can be interpreted as a sign of waning trust.
And it’s worth pointing out as Saudi Arabia’s benchmark index continues to slide.
As Reuters noted on Wednesday:
Saudi Arabia’s index <.TASI> plunges to a fresh 22-month low on renewed selling pressure as investors bet on increased political risk in the kingdom. Banks are hardest hit. Al-Rajhi Bank <1120.SE> falls 6.3 percent, Samba Financial Group <1090.SE> drops 7.7 percent, while Banque Saudi Fransi <1050.SE> and Riyad Bank <1010.SE> each drop 7.3 percent. Saudi Arabia’s index <.TASI> falls 4.4 percent to 5,293 points, taking its losses to 15.5 percent this week, with Wednesday the final day’s trading of the week.
So there you go.