🇺🇸🇸🇦 Saudi Arabia's oil crisis could become America's next financial crisis
What if the Houthis are about to create a financial crisis in America without ever firing a missile at it?
Economist Philip Pilkington sees a dangerous chain reaction developing, and it starts with Saudi Arabia's oil revenues.
The kingdom depends on oil exports to pay for imports and keep its economy running. If the Houthis continue damaging its energy infrastructure, Riyadh could face an increasingly difficult choice.
Let the riyal collapse against the dollar, making everyday imports painfully expensive, or spend its foreign reserves defending the currency.
Pilkington believes Saudi Arabia will choose the latter.
But here's the problem. Those reserves include substantial foreign investments, potentially including US Treasuries. If Riyadh starts liquidating them to support its currency, the pressure could spill directly into America's bond market.
And Washington is already struggling with borrowing costs and inflation.
Pilkington estimates Saudi Arabia could defend its currency for roughly two years, but warns that even six months of sustained reserve depletion could cause serious financial disruption.
He also believes the oil market is masking the scale of the crisis, arguing that inventory releases are keeping prices artificially low. His estimate of a sustainable price? Potentially above $200 a barrel.
The really interesting part is how this turns America's relationship with Saudi Arabia upside down.
For decades, Saudi oil wealth has helped support the dollar-based financial system. Now a prolonged war could force Riyadh to withdraw some of that support precisely when Washington needs it most.
The Houthis may be attacking Saudi Arabia's oil infrastructure, but Pilkington believes the real financial shock could land in Washington.
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