Latest: Saudi Arabia foreign minister says situation in Iraq "carries with it the signs of civil war whose implications for the region we cannot fathom.”
Welcome to our live updates on the crisis in Iraq – we will try and wrap up all the relevant business and political news in the coming hours. Click to the next page for background information on the conflict.
1:00pm / June 18: Reuters is reporting that Sunni militants have broken into the Baiji refinery and are in control of the production units, administration building and four watch towers. We suspect all this will impact oil prices and stock indices in the region. Unrelated but also likely to impact stocks is the breaking news that Arabtec’s CEO has quit – Arabtec had already been dragging down the Dubai index all week after a pretty farcical few days. We will be filing that story separately shortly.
12.20pm / June 18: Saudi Arabia’s foreign minister Prince Saud Al Faisal has also been speaking, to a gathering of leaders in Jeddah. And he paints a pretty grim picture, saying: “This grave situation that is storming Iraq carries with it the signs of civil war whose implications for the region we cannot fathom.”
It is worth noting in the context of his remarks our earlier story, in which Iraq’s PM put the blame firmly on Saudi Arabia for supporting the Sunni militants, saying: “We hold them responsible for supporting these groups financially and morally and for its outcome - which includes crimes that may qualify as genocide: the spilling of Iraqi blood, the destruction of Iraqi state institutions and historic and religious sites."
With the US propping up the Iraqi government and likely to send in the jets to help out, but also seeing Saudi Arabia as its biggest ally in the region, you can see how this is all starting to get very complex and very dangerous for the region.
11.50am / June 18: Brent crude held above $113 per barrel on Wednesday as heavy fighting in Iraq shut the country's biggest refinery and led to the withdrawal of staff by foreign oil firms, stoking worries about exports from the key oil producer, Reuters reports. Some oil companies are pulling foreign staff from Iraq, fearing Islamic militants from the north could strike at major oilfields concentrated in the south despite moves by the Baghdad government to tighten security.
"Exports haven't been affected yet, so the price gain we've seen so far is only on speculation that things might deteriorate further and instability will spread to the south of Iraq," said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
"But as soon as we hear about production affected, then we will start to see the price move up more dramatically. But it's very hard to put a figure on this," said Le Brun. "In a worst case scenario, Brent could go above $120 at a minimum."
Brent lost 14 cents to $113.31 a barrel by 0653 GMT, after settling 51 cents higher. U.S. crude gained 17 cents to $106.53 a barrel after it ended 54 cents lower. The US July contract expires on Friday.
Worries about disruption to Iraq's supply drove up both benchmarks by more than 4 percent last week, the biggest weekly jump since July for Brent and since December for U.S. crude.
Iraq's biggest oil refinery, Baiji, has been shut down and its foreign staff evacuated, although refinery officials said local staff remain in place and the military is in control of the facility.
Iraqi officials say the southern regions that produce some 90 percent of the country's oil are completely safe from ISIL, which has seized much of the north in a week as Baghdad's forces there collapsed.
But the International Energy Agency (IEA) said Iraq's oil output target of 4 million barrels per day by the end of the year looks increasingly at risk, just as demand is picking up due to a stronger global economy.
11.35am / June 18: Iran’s president Hassan Rouhani has turned up the heat on ISIS, saying “many people are ready to go to Iraq to defend Holy sites and put the terrorist in their place.” We’ll bring you more of his remarks when we get them. The prospect of the US and Iranian forces joining together to take on ISIS looks to be fading, but it does look increasingly like the US (with drone strikes) and Iraq (with soldiers on the ground) will be on the same side for once, battling ISIS.
11.10am / June 18: More on the refinery attack, which as we feared could become quite significant. We understand that ISIS entered the area at 3am Dubai time from two of the three main entrances. Reuters reports that heavy fighting is now underway with smoke seen coming from the main building and warehouse. Production was actually halted yesterday and foreigners evacuated as ISIS closed in, but the refinery was, at least yesterday, under Iraqi government control. Given it can process 300,000 barrels a day and supplies oil to most of Iraq, including Baghdad, this could be a huge strategic victory for ISIS if it takes control. It would, quite literally, bring the capital to a standstill.
10.40am / June 18: We’re hearing that militants have struck Iraq’s Baiji refinery with mortars and machine gun fire. Baiji is around 130 miles north of Baghdad and on the main road to Mosul. It is a huge industrial centre and quite significant because it also has the largest oil refinery in the country. Those of you with a long memory will recall this is where many Brits were held as human shields during the first Gulf War in 1990. More importantly, if ISIS are about to take control of this, the already dire economic state of Iraq is about to get even worse.
...background information on next page