US President Donald Trump has threatened the kingdom with “severe punishment” if Khashoggi, who has been critical of powerful Crown Prince Mohammed bin Salman, was killed inside its Istanbul mission.

But Riyadh vowed to hit back on Sunday against any punitive measures as its stock market tumbled, with the fallout from the crisis threatening to imperil Prince Mohammed’s much-hyped economic reform drive.

“The kingdom affirms its total rejection of any threats or attempts to undermine it whether through threats to impose economic sanctions or the use of political pressure,” an official said, according to state news agency SPA.

The official said Riyadh would “respond to any action with a bigger one”, pointing out that the oil superpower “plays an effective and vital role in the world economy”.

According to Saudi-owned Al Arabiya television, the kingdom has “over 30 measures” it could implement.

Following Riyadh’s assertion it would retaliate, Britain, France and Germany released a joint statement saying they were treating Khashoggi’s disappearance “with the utmost seriousness”.

“There needs to be a credible investigation to establish the truth about what happened, and — if relevant — to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account.”

This message had been conveyed “directly to the Saudi authorities”, said the statement, signed by Britain’s foreign minister Jeremy Hunt, his French counterpart Jean-Yves Le Drian and Germany’s Heiko Maas.

– ‘Baseless allegations’ –

Khashoggi, a Washington Post contributor, vanished after entering the consulate on October 2.

Saudi Arabia insists Khashoggi left the building safely and dismissed accusations that authorities had ordered his murder by a hit squad as “lies and baseless allegations”.

Turkish officials have said they believe Khashoggi was killed inside the mission and claims have been leaked to media that he was tortured and even dismembered.

A Saudi dissident in Quebec said on Sunday he believes the kingdom hacked his phone and listened to calls he had with Jamal Khashoggi prior to the journalist’s disappearance.

“For sure, they listened to the conversation between me and Jamal and other activists, in Canada, in the States, in Turkey, in Saudi Arabia,” Omar Abdulaziz said in an interview with the Canadian Broadcasting Corporation.

AFP/File / OZAN KOSE. Protestors hold pictures of journalist Jamal Khashoggi during a demonstration in front of the Saudi Arabian consulate in Istanbul on October 5, 2018.

Saudi King Salman spoke to Turkish President Recep Tayyip Erdogan by phone on Sunday, the Saudi foreign ministry said, telling Erdogan: “No-one will get (to) undermine the strength of this relationship.”

According to a Turkish presidential source, who asked not to be named, Erdogan and the king discussed “the issue of shedding light on the case of Jamal Khashoggi” and also emphasised the “importance of creating a joint working group within the framework of the investigation.”

In the US, White House economic adviser Larry Kudlow said Saudi Arabia should take Trump’s warning over the journalist’s fate seriously.

“When the president warns, people should take him at his word,” he told Fox.

“If the Saudis are involved, if Khashoggi was killed or harmed or whatever, bad outcome here. He (Trump) will take action.”

– Saudi stocks tumble –

Investors have taken fright, prompting Saudi stocks to tumble by around seven percent at one point on Sunday, wiping out their gains for 2018.

The kingdom’s Tadawul All-Shares Index (TASI) lost more than 500 points, diving by seven percent in the first two hours of trading Sunday, in panic selling reminiscent of the days after the global financial crisis in 2008.

It later clawed back some losses to close the day down 3.5 percent at 7,266.59 points.

Japanese SoftBank’s shares also took a dive on Monday, falling by nearly seven percent over fears for its major financial ties with Saudi Arabia.

Mohammed Zidan, market strategist at Thinkmarket in Dubai, said the drop in Saudi stocks was linked to the uncertainty surrounding the Khashoggi affair.

“The withdrawal of top participants from the Riyadh investment conference has also negatively impacted traders’ sentiment,” he told AFP.

Business barons including British billionaire Richard Branson and Uber CEO Dara Khosrowshahi, as well as media powerhouses like Bloomberg and CNN, have pulled out of next week’s Future Investment Initiative (FII) in Riyadh.

JP Morgan CEO James Dimon and Ford chairman Bill Ford said on Sunday they would also not attend.

The cancellations have cast a pall over the annual summit at which Prince Mohammed wowed investors last year with talking robots and blueprints for a futuristic mega city.

The withdrawal of Uber’s Khosrowshahi from the event is particularly symbolic as the kingdom’s vast Public Investment Fund (PIF) has invested $3.5 billion in the ride-hailing app.

Featured Photo: Saudi Royal Palace/AFP/File / BANDAR AL-JALOUD. Saudi Crown Prince Mohammed bin Salman has garnered international attention with his reforms and rapid rise to power.

Dubai (AFP) – Saudi Arabia’s halt to oil shipments through a strategic waterway after Yemeni rebel attacks could provoke an international intervention in Yemen’s “forgotten” war, analysts say.

The world’s top oil exporter on Wednesday suspended all oil deliveries through the Bab al-Mandab Strait after accusing the Iran-aligned Huthis of attacking two giant tankers carrying four million barrels of crude.

“All oil shipments through Bab al-Mandab Strait have been suspended temporarily until… maritime transit through the area is safe,” said Saudi Energy Minister Khalid al-Falih.

AFP/File / FAYEZ NURELDINE. Saudi Arabia’s Minister of Energy, Industry and Mineral Resources Khalid Al-Falih, pictured in December 2017, announced that all oil shipments through a Yemeni waterway have been halted due to rebel attacks in the area.

One of the vessels sustained minor damage in Wednesday’s attack and there were no casualties, the Saudi national oil company Aramco said, while the Huthis said they targeted a Saudi warship.

The escalation of tensions in the strategic region could encourage outside powers to intervene, said Ellen Wald, author of the book “Saudi Inc”.

“The Red Sea is a very important shipping lane. If there is a major disruption, European powers, Egypt and the United States would all have reason to intervene,” she wrote in Forbes magazine.

“An international intervention against the Huthis may be just what Saudi Arabia wants.”

Global oil prices rose slightly after the incident, although industry experts said the increase was unlikely to last.

The incident, however, draws the attention of the international community to the dangers of spillover from Yemen’s festering three-year conflict.

The Bab al-Mandab connects the Red Sea and the Arabian Sea and is a narrow, strategic navigation lane for oil and international trade.

“The Saudi halt will cause prices to increase slightly and for a limited period,” Kuwaiti oil expert Kamel al-Harami said.

The main impact of the incident appears to be military, Harami said.

“It could be a reason for increased naval presence for many countries, mainly the United States and Russia, thus resulting in an escalation of tensions,” he said.

The suspension comes as Saudi Arabia is seeking to ramp up oil production under pressure from the United States, and at a time of raised US-Iran tensions.

James Dorsey, an expert on Middle East affairs, said the attacks on oil tankers would draw international attention to Yemen.

“A spike in oil prices… may be short-lived, but the impact on Yemen’s forgotten war is likely to put the devastating conflict on the front burner,” he said.

“The halt of oil shipments could provoke an escalation of the conflict with external powers intervening in a bid to assist Saudi Arabia.”

– ‘Threat to international trade’ –

Saudi Arabia itself intervened in Yemen in 2015, leading a military coalition to prop up the country’s government after Huthi rebels ousted it from the capital Sanaa the previous year.

Yemen’s government, in a statement Thursday carried by the state-run Saba news agency, condemned the attack on shipping and urged the international community to “immediately stand with and support” the coalition in its fight against the Huthis.

At least 10,000 people have been killed and thousands others wounded in the conflict in Yemen, one of the world’s most impoverished nations.

Over 20 million Yemenis need humanitarian aid, millions are on the brink of famine and hundreds of thousands have been infected with diseases, mainly cholera.

Oil tankers from the Gulf pass through the Bab al-Mandab to enter the Red Sea as they head for Europe via the Suez Canal.

About 4.8 million barrels of crude oil and refined products pass through the waterway each day, according to the US Energy Information Administration (EIA).

The Saudi-led coalition has repeatedly raised alarm that Huthi rebels threaten vessels in the Red Sea through their control of the strategic Hodeida port.

“This terrorist attack is a dangerous threat to the freedom of navigation and international trade in the Red Sea,” said Turki al-Maliki, a spokesman for the Saudi-led coalition.

Pro-government forces backed up by the coalition have paused an assault on Hodeida port in what they say is a bid to give United Nations-led peace efforts a chance.

Featured Photo: AFP/File / SALEH AL-OBEIDI. Pro-government forces, pictured in February 2017, walk in the port of Mokha, a Yemeni coastal town that borders the Bab al-Mandab Strait, a strategic oil delivery waterway.