A Saudi-Iran military conflict would be catastrophic for oil markets

THE rift between Saudi Arabia and Iran has quickly ballooned into the worst conflict in decades between the two countries.

The back-and-forth escalation quickly turned the simmering tension into an overt struggle for power in the Middle East. First, the execution of a prominent Shiite cleric prompted protesters to set fire to the Saudi embassy in Teheran. Saudi Arabia cut off diplomatic relations and kicked out Iranian diplomatic personnel. Teheran banned Saudi goods from entering Iran. Worst of all, Iran blames Saudi Arabia for an airstrike that landed near its embassy in Yemen.

Saudi Arabia's Sunni allies in the Arabian Peninsula largely followed suit by downgrading diplomatic ties with Iran. However, recognising the dire implications of a major conflict in the region, most of Saudi Arabia's Gulf State allies did not go as far as to entirely sever diplomatic relations, as Saudi Arabia did. Bahrain, the one nation most closely allied with Riyadh, was the only one to take such a step.