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The new war between Israel and the Palestinians in Gaza has likely dashed hopes, at least for now, of a normalization of relations between Israel and Saudi Arabia, potentially disrupting financial markets and possibly causing turbulence in oil markets when negotiations resume. operations on Monday.
Israeli Prime Minister Netanyahu declared war against Hamas earlier on Saturday after the group’s forces crossed the border from Gaza, clashing with Israeli forces and advancing into large sections of territory in the southern part of the country.
The Wall Street Journal reported late Friday that Saudi Arabia had told U.S. officials it might be willing to increase oil production early next year if crude prices were high, a move aimed at winning goodwill in Congress for a deal. in which the Saudis would recognize Israel and in exchange would obtain a defense pact with the United States.
The Biden administration hoped to negotiate a deal between Saudi Arabia and Israel in the next six months, as the three sides had agreed on the broad outlines of a deal and were beginning to work out the details, according to the report.
Public recognition of an agreement that would include a Saudi commitment to increase oil production could have resulted in keeping crude prices below $100 a barrel.
But “it’s very difficult to see the way forward with this huge trading effort this morning,” said RBC Capital head of commodities strategy Helima Croft. Barron, Adding the surprise attack leaves Israel unlikely to make concessions to the Palestinians that the Saudi government could have sought out.
Before the Hamas attack, Democratic and Republican lawmakers in the United States had often expressed concerns about aligning themselves too closely with Saudi Arabia or giving a diplomatic boost to Saudi Crown Prince Mohammed bin Salman.
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