🇺🇸🇸🇦 The Iran war may have just broken a deal that kept America's borrowing costs low.
Since 1974, the U.S. and Saudi Arabia have had a quiet deal: Gulf states sell oil in dollars and park the profits in U.S. assets.
In return, Washington provides military protection.
That arrangement has kept U.S. borrowing costs artificially low for 50 years.
The Iran war is breaking it.
The U.S. attacked without warning its Gulf allies, left their infrastructure exposed to Iranian strikes, and damaged Qatar's LNG production for potentially 5 years.
The message to the region: the security umbrella isn't real.
At the same time, the U.S. imports less Gulf oil than ever. The deal made sense when America needed the crude. It needs it less every year.
Saudi Arabia and the UAE hold around $250 billion in U.S. debt.
If the petrodollar unravels, that money won’t stay parked in Treasuries, and everyone will feel it.
Source: Financial Times