The string of high-profile arrests based on anti-corruption charges in Saudi Arabia Saturday has increased speculation that foreign capital will see investing in the Kingdom as increasingly risky. Many analysts have interpreted the move as an attempt at consolidating power by Mohammad bin Salman, scheduled to become the ruler next year, within a monarchic political system. This logically can be expected to impact upon the Saudi economy, most obviously in the shape of increased pressure on the Saudi Riyal and on Saudi debt. Dozens of ministers, royals, officials, and senior military officials were dismissed or arrested. Several senior Princes have been detained, including the internationally well-known Prince Alwaleed Bin Talal (a major investor in Citigroup and Twitter), as well as the head of the National Guard, Prince Mutaib bin Abdullah. The arrests come just after Riyadh airport was attacked by a ballistic missile from an Iranian proxy, and hard on the heels of the Saudi-based resignation of the Lebanese Prime Minister, which have already heightened regional tension and possibly contributed to the price of Crude Oil breaking out to new 2-year high prices above $56 per barrel.
Obviously, it is not easy to know what is really going on: whether there is a danger of a coup or unrest, for example. Yet it is obvious that such an outcome would not be a surprise, and instability in Saudi Arabia usually leads to an increase in the price of Crude Oil. Traders should take note.