The United Arab Emirates said on Tuesday it quit Opec and Opec+, dealing a heavy blow to the oil exporting groups, at a time when the Iran war has caused a historic energy shock and unsettled the global economy.
The stunning loss of the UAE, a longstanding Opec member, could create disarray and weaken the group, which has usually sought to show a united front despite internal disagreements over a range of issues from geopolitics to production quotas.
Opec Gulf producers have already been struggling to ship exports through the Strait of Hormuz, a narrow chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas normally passes, because of Iranian threats and attacks against vessels.
But the UAE exit from Opec represents a big win for US President Donald Trump, who has accused the organisation of "ripping off the rest of the world" by inflating oil prices.
Trump has also linked US military support for the Gulf with oil prices, saying that while the US defends Opec members, they "exploit this by imposing high oil prices".
The move came after the UAE, a regional business hub and one of Washington's most important allies, criticised fellow Arab states for not doing enough to protect it from numerous Iranian attacks during the war.
Anwar Gargash, the diplomatic adviser for the UAE president, criticised the Arab and Gulf response to the Iranian attacks in a session at the Gulf Influencers Forum on Monday.
"The Gulf Cooperation Council countries supported each other logistically, but politically and militarily, I think their position has been the weakest historically," Gargash said.
"I expect this weak stance from the Arab League and I am not surprised by it, but I haven't expected it from the (Gulf) Cooperation Council and I am surprised by it," he said.
Oil prices hit $110
Stocks fell and oil rose on Tuesday as investors assessed the stalemate in the Iran conflict and worried the AI boom was losing momentum, while the dollar climbed.
The US was reviewing Tehran's latest proposal to resolve the war. A US official said President Donald Trump was unhappy with the plan as it did not address Iran's nuclear programme.
The two-month-long conflict is at an impasse and energy and other supplies are still failing to cross through the critical Strait of Hormuz, pushing oil prices above $110 a barrel on Tuesday.
Brent crude oil LCOc1 rose 3% to $111.40 a barrel, a three-week high, while US oil CLc1 was up 3.8% at $100.
Oil prices have steadily climbed in recent days as hopes have ebbed for an imminent peace deal, pushing up bond yields around the world.
Futures for the US benchmark S&P 500 stock index ESc1 fell 0.7% on Tuesday, while those for tech-focused Nasdaq dropped 1.3%.
"Earnings season has helped markets look through the disruption, but the longer key oil flows remain constrained, the greater the risk that higher energy costs begin to bite," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
