Saudi stocks have suffered since the anti-corruption drive began. REUTERS/Faisal Al Nasser
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It is what Donald Rumsfeld once called the "unknown unknowns" that we were not thinking about and did not even know about. In markets, assets deemed high risk tend to be priced so that they do little harm when things go wrong. In Saudi Arabia, the young crown prince asserted his authority by imprisoning many members of the Saudi power structure.Second, Saudi Arabia has a critical role in the politics of the Middle East.Finally, the risk and uncertainty in the situation could scarcely be higher. Nassim Nicholas Taleb, viewed by many in the market as a godlike oracle on the subject of risk, has called Saudi Arabia the most "fragile" nation on earth. The news from Riyadh was understandably greeted by a sharp rise in the oil price, while Saudi Arabian stocks subject of great interest recently as they approach inclusion in the main global indices have had a bad time.One good explanation is that oil does not matter as much as it used to do.Finally, it may be that the market believes the events in Saudi Arabia are "no big deal".
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