Growing tensions between the U.S. and Russia, punctuated by new sanctions against Russia, a more hawkish White House foreign policy team, and a changing policy towards the Iran nuclear deal are the backdrop to Friday’s missile strike on Syrian chemical weapons sites by the U.S., France and the U.K. The situation in Syria could escalate U.S. confrontations with Russia and Iran, although heightened rhetoric seems more likely than action, at this point. The next event may be in May when the decision on waiving extraterritorial sanctions related to the Iran nuclear deal comes up again. Note, the Administration may not be ready to take action by then, kicking this issue into the summer. Clearly, underlying tensions in the region will not dissipate in 2018. The geopolitical premium will continue to support crude oil prices even as U.S. shale output continues to climb.
Saudi denial of oil tankers entering a Yemeni port brought the Yemeni conflict to the fore in the oil sector. While the oil implications are negligible, the movement of the conflict towards the sea raises the potential for an accidental incident leading to direct conflict between the Saudi coalition and Iran, and the U.S.
Early indications from the Trump Administration hint at efforts to tip the balance back towards the Saudis.