First, there is sanctions risk. While emerging markets investors are practised at shrugging off the unpalatable, there is always a risk that sanctions will follow once things go too far. In March, investors bought a Russia sovereign bond straight after the Salisbury poisoning. They regretted it in April when the US slapped the country with a new set of sanctions.
Secondly, events such as the Salisbury poisoning and the Khashoggi episode shine a light on life in those countries. In 2010 the Arab Spring was a response to oppressive regimes and low standards of living. Few in the west expected it but they cannot say they have not been warned now.
In all the excitement about how modern Saudi’s crown prince Mohammed bin Salman is — hailed as a revolutionary allowing women to drive — it is easy to forget that in his country, dissent and homosexuality are punishable by death. These are not a fashionable policies among the growing number of investors who take ethical concerns seriously.
Oil or not, friends with the US or not, it is easy to foresee an unravelling for Saudi Arabia in the markets. Certainly a list of bank CEOs as well as IMF managing director Christine Lagarde are distancing themselves from Saudi this week, dropping out of its investment conference.
Events like the Khashoggi affair are not to be brushed aside. Saudi has been shown to be a riskier place to invest than it was a week ago.