Could This Spark a Stock Market Crash in ? Michael Robinson's Tech Investor's Forecast has just been released, giving you the strategies, tactics and 7 stock picks that'll ensure you cash in on the greatest commercialization era Silicon Valley has ever seen.

Get details on your free copy here. That the decline in oil prices represents a nasty blow to the economy of Saudi Arabia is a given.

However, oil is an asset like no other; it is tied to the global financial system and its price drop is affecting the very fate of the kingdom. At current prices, revenues are but a shadow of their past selves.

Analysis: Behind the global stock market plunge of - Al Jazeera English

This weakness is causing a flight of capital and the depletion of foreign exchange reserves put in place to protect the value of the currency. The mere reduction in revenue due to depressed crude oil prices is then amplified and exacerbated. The collapse in oil prices has lowered the confidence of investors worldwide, triggering a domino effect of stock market crashes.

The effects will be echoed in with the potential for a global market crash. Saudi Arabia and other Middle Eastern countries, such as Egypt, will be particularly vulnerable to any loss in confidence.

This has profound geopolitical implications: Trouble in Saudi Arabia would have global geopolitical and economic repercussions in —and certainly a major market crash. Now Saudi Arabia is directly and indirectly involved in four wars Yemen, Syria, Iraq, and Libya and is trying to make sure that the government of President Abdel Fattah el-Sisi in Egypt does not implode.

In Syria, the Saudis are trying to overthrow President Assad and the costs have increased dramatically. The Saudi government has been forced to take measures that will amount to nothing short of an unprecedented austerity program in Saudi austerity will begin with the cutting of public subsidies.

Wealthier Saudis will pay more for electricity and water and smokers will face the inevitable tax increases on tobacco consumption. Saudi Arabia may even privatize certain economic sectors, which could include the introduction of a bond market, which will issue securities.

All of this is new and potentially dangerous for a country accustomed to a budget surplus.

Saudi Arabia: Stock Market Crash Leaves Investor's Futures Uncertain - ASHARQ AL-AWSAT English

It is also a new situation for the world and global markets will react in a bearish fashion, prompting an overall crash in As reported by al-Arabiya TV, a few days ago, King Salman, who ascended the throne last January, announced that Saudi Arabia is ready to implement programs to diversify sources of income and reduce dependence on oil as a main source of income. Consequently, in , the Saudi monarch would like to narrow the gap between income and expenditures at billion riyals.

The markets read this move as OPEC, and Saudi Arabia in particular, choosing to forego production quotas. Given the evident budget constraints, how long can Saudi Arabia keep up the pretense that everything is proceeding according to an apparent plan, when the current oil production regime is driving crude prices to near-collapse in Saudi Arabia is paying its obstinacy to take out American shale operations, something that may yet succeed, given the fact that the current oil price is well below the break-even mark.

The Saudi policy also targets, and given the differences over Syria, the crippling of Russia, which, it turns out, exported more oil than the kingdom in As Saudi Arabia has been burning through reserves at an unprecedented pace over the past year, mostly to support military spending and social welfare to keep social unrest in check, it is unclear what King Salman has in mind when he urges diversification.

Saudi stock market hits highest close for | Arab News

Even SABIC, the huge Saudi chemicals consortium, relies on oil production. Indeed, social spending is where the budget deficit exposes its biggest risk for the kingdom.

The reality is that oil production revenues have masked the problem of Saudi indigenous unemployment and underemployment, both of which are at unsustainable levels because the private sector labor market is based almost exclusively on foreign labor Asian and menial jobs.

The public sector, meanwhile, is filled with Saudi citizens interested mainly in pocketing generous state salaries while their jobs are seen as a right, an essential component of the bargain between the House of Saud and its subjects. Now the kingdom is coming under increasing pressure to cut, as much as King Salman will insist on reducing costs. It will be next to impossible to downsize the welfare state, much less the military budget. How will King Salman confront the current crisis?

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