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Attack on Saudi Arabia oil sites raises risks amid US-Iran tension

A weekend drone attack on Saudi Arabia that cut into global energy supplies and halved the kingdom's oil production threatened today to fuel a regional crisis, as Iran denied US allegations it launched the assault and tensions remained high over Tehran's collapsing nuclear deal.

Iran called the US claims "maximum lies," while a commander in its paramilitary Revolutionary Guard reiterated its forces could strike US military bases across the Mideast with their arsenal of ballistic missiles. A prominent US senator suggested striking Iranian oil refineries in response to the assault, claimed by Yemen's Iran-backed Houthi rebels, on Saudi Arabia's largest oil processing facility.

"Because of the tension and sensitive situation, our region is like a powder keg," warned Guard Brig. Gen. Amir Ali Hajizadeh. "When these contacts come too close, when forces come into contact with one another, it is possible a conflict happens because of a misunderstanding."

Actions on any side could break into the open a twilight war that's been raging just below the surface of the wider Persian Gulf in recent months. Already, there have been mysterious attacks on oil tankers that America blames on Tehran, at least one suspected Israeli strike on Shiite forces in Iraq, and Iran shooting down a US military surveillance drone.

The attack yesterday on Saudi Arabia's Abqaiq plant and its Khurais oil field led to the interruption of an estimated 5.7 million barrels of the kingdom's crude oil production per day, equivalent to more than 5 per cent of the world's daily supply. It remains unclear how King Salman and his assertive son, Crown Prince Mohammed bin Salman, will respond to an attack targeting the heart of the Saudi oil industry.

There was no immediate impact on global oil prices from the attacks as markets were closed for the weekend, but analysts anticipate a spike in oil prices when markets reopen tomorrow. Saudi Arabia has promised to fill in the cut in production with its reserves, but has not said how long it will take to repair the damage.

US Secretary of State Mike Pompeo directly blamed Iran for the Saudi attack on Twitter, without offering evidence to support his claim.

"Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world's energy supply," Pompeo wrote late yesterday. "There is no evidence the attacks came from Yemen."

The US, Western nations, their Gulf Arab allies and U.N. experts say Iran supplies the Houthis with weapons and drones — a charge that Tehran denies.

US officials previously alleged at least one recent drone attack on Saudi Arabia came from Iraq, where Iran backs Shiite militias. Those militias in recent weeks have been targeted themselves by mysterious airstrikes, with at least one believed to have been carried out by Israel.

Iranian Foreign Ministry spokesman Abbas Mousavi today dismissed Pompeo's remarks as "blind and futile comments."

"The Americans adopted the 'maximum pressure' policy against Iran, which, due to its failure, is leaning toward 'maximum lies,'" Mousavi said in a statement.

Separately, Iraqi Prime Minister Adel Abdul-Mahdi's office issued a statement today denying the drone attack came from there. Iraq "abides by its constitution that prevents the use of its lands to launch aggressions against neighboring countries," the statement said.

Oil-rich Kuwait also said it would increase security around the country's "vital sites" over the attacks.

Houthi leader Muhammad al-Bukhaiti reiterated his group's claim of responsibility, telling The Associated Press today it exploited "vulnerabilities" in Saudi air defenses to strike the targets. He did not elaborate.

Iran, meanwhile, kept up its own threats.

Hajizadeh, the Guard brigadier general who leads the country's aerospace programme, gave an interview published across Iranian media today that discussed Iran's downing of a US drone in July. He said Guard forces were ready for a counterattack if America responded, naming the Al-Udeid Air Base in Qatar and Al-Dhafra Air Base near Abu Dhabi in the United Arab Emirates as immediate targets, as well as US Navy ships in the Persian Gulf and the Arabian Sea.

"Wherever they are, it only takes one spark and we hit their vessels, their air bases, their troops," he said in a video published online with English subtitles.

It wasn't just Iran making threats. US Sen. Lindsey Graham, a South Carolina Republican close to President Donald Trump, suggested retaliatory strikes targeting Iran.

"Iran will not stop their misbehaviour until the consequences become more real, like attacking their refineries, which will break the regime's back," Graham wrote on Twitter.

All this comes before the United Nations General Assembly, which will draw world leaders to New York in a little over a week. There's been speculation of a potential meeting between Trump and Iranian President Hassan Rouhani on the summit's sidelines, possibly in exchange for the lifting of some economic sanctions the American leader imposed on Tehran after unilaterally withdrawing from the nuclear accord over a year ago.

If Iran had a hand in yesterday's attack, it could be to bolster their position ahead of any talks, analysts say.

"The main point for Iran, in my opinion, is not necessarily to derail a meeting between Trump and Rouhani but to increase its leverage ahead of it," said Michael Horowitz, the head of intelligence at the Bahrain-based risk management firm Le Beck International. "By carrying out such a major attack, Iran wants to send the message that the only way to decrease tensions is to comply with its demands regarding sanctions relief."

However, he warned there could be a danger of Iran "overplaying" its hand.

"There will be no political benefit for Trump in a meeting with Rouhani if this meeting sends the message that the US simply surrendered to Iranian demands," he said.

Before yesterdays, attack, benchmark Brent crude had been trading at just above $60 ($94 NZD) a barrel, but analysts anticipated a spike in oil prices when markets reopen tomorrow.

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The attack, carried out by the Houthi rebels, knocked out half of its oil supply.