Oil trims gains but Middle East risks keep stocks on back foot

TOKYO - Oil futures shed some of their massive gains on Tuesday as the United States flagged the possible release of crude reserves, but the threat of military action over the attacks on Saudi oil facilities kept prices elevated and stocks under pressure.

Investors otherwise broadly remain on the sidelines ahead of an expected rate cut from the U.S. Federal Reserve on Wednesday. “The U.S. and other countries have oil reserves, which helps sentiment in a case like this. You also have a lot of positions riding on the Fed meeting.” The drone attack over the weekend has cut the kingdom’s oil production in half, creating the biggest disruption to global oil supplies in absolute terms since the overthrow of the Iranian Shah in 1979, International Energy Agency data show.

Iran has rejected U.S. charges that it was behind the attacks. Tension between the two countries were already running high over Iran’s ambitions for nuclear weapons. The strikes in Saudi Arabia are likely to raise regional tensions even further.

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