SINGAPORE (Jan 23): Despite 2019 ending on a cheerful high, markets turned jittery when the new year started with old enemies US and Iran provoking each other, raising tensions in the Middle East and worldwide by a few notches. Investors, therefore, should adopt a more defensive stance. “To me, this is a known unknown — there is always a risk that something would happen,” says Adrian Loh, UOB Kay Hian’s head of research, at a recent forum.

The geopolitical tensions — marked throughout 2018 and 2019 by the US-China trade war — suggests a potentially more turbulent year for 2020. There’s more. In 2019, there were three attacks on oil assets in the Middle East, which remains the most critical oil producing and exporting region. Two of those attacks were on oil tankers, and the third and most serious incident, using drones, involved the oil process facilities of Saudi Arabia. These incidents were largely “discounted” by the market but from the perspective of UOB Kay Hian, investors need to pay more attention to the risks.

The US Energy Information Administration estimates that Opec, the oil exporting cartel, has spare capacity of just 1.88 million barrels per day as at December 2019. This means in the event of a prolonged disruption to major oil supplies, the market will be tapping into the strategic petroleum reserves.

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