June 30 (UPI) -- Lingering tensions in the Persian Gulf related to the diplomatic standoff with Qatar is a risk that's been largely ignored, RBC Capital Markets said.
Saudi Arabia earlier this month led a coalition of Middle East countries in severing ties with Qatar, adding a layer of geopolitical risk to the global energy market. Saudi Arabia is the largest oil producer in the Organization of Petroleum Exporting Countries, Qatar is a leading natural gas supplier and the Persian Gulf is a choke point for the flow of energy supplies from the region.
"Given the severity of the standoff, we are no longer able to completely write off a disruption of energy transit routes, the worsening of regional proxy wars, or even some type of confrontation between Saudi Arabia and Iran," the emailed report from the Royal Bank of Canada read.
Saudi Arabia and Iran are historic adversaries. Iran is the only party to a multilateral production deal with room for growth.
This week, the U.S. government emphasized a strategy of energy dominance that U.S. Energy Secretary Rick Perry said meant self-reliance and security from external geopolitical shocks. On the diplomatic front, the report from RBC said Washington's message has so far been mixed, a posture that opens the door for expanded Russian influence in the Middle East.
On energy markets, the Persian Gulf dust-up has raised questions about unity among OPEC members coordinating to ease the supply-side strains that brought crude oil prices to historic lows last year with managed production declines.
"We have therefore raised our risk ratings in our OPEC watch list for Saudi Arabia, UAE, Iran, and once again Qatar," the report from RBC read.