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Iran's militarized oil blackmail exposes failure of deterrence

Saudi defense minister on stage with weapons remnants from the weekend's attack on its oil facilities
Pieces of cruise missiles and drones recovered from the attack and identified by Saudi Arabia as Iranian. Photo: Fayez Nureldine/AFP/Getty Images

This past weekend's strikes on critical infrastructure at Saudi Arabia's second largest oil field at Khurais and its vital crude oil stabilization center at Abqaiq virtually eliminated the cushion of spare oil field capacity that typically prevents market panics during large supply disruptions.

Why it matters: The attack marks a major escalation of the proxy war between regional rivals Saudi Arabia and Iran that has raged since 2015, though there have been previous acts of sabotage on oil facilities. Its success shakes confidence in Saudi Arabia's status as the global swing producer of spare oil supply, a role that has afforded Riyadh substantial influence.

Trump says U.S. will "substantially" increase sanctions against Iran

Collage of Iranian President Hassan Rouhani and President Trump
Iranian President Hasan Rouhani (L) and President Trump. Photo: Adem Altan/AFP/Getty Images; Mark Wilson/Getty Images

President Trump tweeted on Wednesday that he's instructed Treasury Secretary Steven Mnuchin to "substantially" increase sanctions against Iran.

Why it matters: It's unclear what the new sanctions will target, but the announcement comes 4 days after drone attacks on oil facilities in Saudi Arabia dealt a blow to the global oil supply. Both Secretary of State Mike Pompeo and the Saudis have blamed Iran for the attacks, though officials are still investigating. Iranian officials have warned the U.S. that they are prepared to respond to any attack from the U.S. or Saudi Arabia, the Washington Post reports.