LONDON: Oil prices fell more than one per cent on Monday (Sep 30) after Saudi Arabia's de facto leader said war with Iran would destroy the world economy and hinted instead at a non-military solution.
Washington, Riyadh, Berlin, London and Paris blame Iran for attacks that damaged the Saudi oil sector on Sep 14 and forced the world's largest crude exporter to sharply reduce production.
Stock markets were mostly higher as traders tracked the latest twists and turns regarding the US-China trade war. The dollar was mixed against main rivals.
"In terms of geopolitical concerns, common sense is prevailing for now in Saudi Arabia," noted analyst Naeem Aslam at traders ThinkMarkets, in reference to the comments by Saudi Arabia's crown prince in an interview with CBS show "60 minutes" broadcast over the weekend.
Mohammed bin Salman said a war would be catastrophic for global growth.
"Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven't seen in our lifetimes," the prince said.
"The region represents about 30 per cent of the world's energy supplies, about 20 per cent of global trade passages, about four per cent of the world GDP. Imagine all of these three things stop," he said.
"This means a total collapse of the global economy, and not just Saudi Arabia or the Middle East countries."
Iran's oil minister meanwhile on Sunday ordered his country's energy sector to be on high alert to the threat of "physical and cyber" attacks.
Bijan Namdar Zanganeh said "it is necessary for all companies and installations of the oil industry to be on full alert against physical and cyber threats", in a statement published on the oil ministry's Shana website.
Tehran has denied any link to the Saudi strikes, which were claimed by Huthi rebels in Yemen. Iran supports the rebels against a Saudi-led coalition that has been fighting the Huthis since 2015.
"Oil has been amazing everyone over the last couple of weeks, having surged on the back of the attack on the Saudi oil facilities before reversing the entirety of these gains, despite the country temporarily losing half its output," said Craig Erlam, analyst at Oanda trading group.
"Traders are clearly not particularly concerned about risk premiums in oil ... Instead, the focus again seems to be shifting back to the demand dynamics and the risk of further downgrades as the global economic slowdown takes hold," he said.
US-CHINA TRADE WAR
On the stock markets, investors appeared cautiously optimistic about an easing of tensions in the US-China trade war and ahead of key economic data later in the week, with prices on Wall Street higher and the blue-chip indices in Germany and France closing in positive territory.
But analysts said investors would probably remain cautious for the time being.
"The Sino-US trade negotiations have been full of twists and turns," said Zhang Gang, an analyst with Central China Securities.
"You don't know what remarks Trump would make in the next seven days, or what variables there will be from the US side. So (investors) have set themselves in a low-key, waiting position."
Key figures around 1540 GMT:
Brent North Sea crude: DOWN 1.3 per cent at US$60.29 per barrel
West Texas Intermediate: DOWN 1.3 per cent at US$55.21 per barrel
London - FTSE 100: DOWN 0.2 per cent at 7,408.21 points (close)
Frankfurt - DAX 30: UP 0.4 per cent at 12,428.08 (close)
Paris - CAC 40: UP 0.7 per cent at 5,677.79 (close_
EURO STOXX 50: UP 0.3 per cent at 3,569.45
Hong Kong - Hang Seng: UP 0.5 per cent at 26,092.27 (close)
Shanghai - Composite: DOWN 0.9 per cent at 2,905.19 (close)
Tokyo - Nikkei 225: DOWN 0.6 per cent at 21,755.84 (close)
Euro/dollar: DOWN at US$1.0903 from US$1.0941 at 2030 GMT
Pound/dollar: UP at US$1.2301 from US$1.2293
Euro/pound: DOWN at 88.83 pence from 89.01 pence
Dollar/yen: UP at 108.11 yen from 107.95