There has been limited market reaction to the drone attacks on Saudi energy assets as investors focus on interest rates and weak growth. But the unprecedented scale of the strikes, and the threat of more, underline the risky ‘new normal’ for the global economy.

SINGAPORE (Sept 23): On the edge of war and peace” — that is how The New York Times has described US President Donald Trump’s vacillation between hardline and conciliatory decisions on Iran. Both US and Saudi Arabian officials have accused Iran of being behind the attacks on Saudi Arabian oil and gas assets that put roughly 50% of the kingdom’s oil production, or about 5% of global supply, out of action.

On Sept 16, Trump tweeted that the US was “locked and loaded”, in response to the strikes. Not long after that alarming declaration, however, Trump said at the White House that he would “certainly like to avoid” war. “I know they want to make a deal,” he was reported to have said of Iranian officials. Yet, a couple of days later, Trump announces that he has ordered new sanctions to be imposed on Iran, even as he says he is open to meeting President Hassan Rouhani. The Trump administration had, last November, imposed almost-full economic sanctions on Iran that had been lifted or waived under a deal struck in 2015. Rouhani has said Iran would not agree to a meeting until the economic sanctions were lifted.

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