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HONG KONG — Oil prices dipped on Tuesday but held most of the previous day’s record gains following an attack on Saudi facilities that wiped out half the country’s output, with traders nervously awaiting the US response after it said Iran was likely to blame.

The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter as well as other producers.

It has also taken attention away from the upcoming trade talks between China and the US, as well as a much-anticipated policy meeting of the Federal Reserve (Fed), which is expected to cut interest rates.

Trump said he was ready to help Riyadh following the strikes, but would await a “definitive” determination on who was responsible.

Iran-backed Houthi rebels in Yemen have claimed responsibility, but Washington and Riyadh have pointed the finger at Tehran, which denies the accusations.

Trump appeared to temper his earlier warning that the US was “locked and loaded” to respond, saying: “I’m not looking to get into a new conflict, but sometimes you have to.”

Faint hopes for talks between the US and Iran to ease tensions at the UN General Assembly this month were ruled out by supreme leader Ayatollah Ali Khamenei on Tuesday.

The weekend’s attack sent both main oil prices surging almost 15 per cent on Monday and they managed to hold most of those in early Asian trade with WTI and Brent dipping a little more than one per cent.

Uncertainty and geopolitical fears left Asian equities mixed, having enjoyed an upbeat month thanks to easing trade war tensions and fresh easing measures by global central banks.

Vulnerability 

Hong Kong fell 1.2 per cent with sometimes-violent unrest in the city adding to investor woes and dragging on the economy.

Tokyo ended up 0.1 per cent — marking a ten-day winning run — as investors returned from a long weekend, Shanghai slipped 1.7 per cent, Sydney added 0.3 per cent and Singapore retreated 0.6 per cent.

Taipei, Mumbai and Manila were also lower, though Seoul, Wellington, Bangkok and Jakarta rose slightly.

In early trade London reversed initial losses to rise 0.2 per cent, while Paris was up 0.1 per cent and Frankfurt was flat.

“Geopolitical uncertainty is certainly nothing new in the Middle East. However even by recent standards yesterday’s sharp rise in oil prices... was a historic move,” said Michael Hewson, chief market analyst at CMC Markets UK.

“The size of the move has raised concerns that if sustained, a rise in prices could prompt further weakness in a global economy already vulnerable to concerns about slowing demand.”

But while there are fears of a conflagration in the Middle East, observers said the chances of that were low, with Jeffrey Halley, senior market analyst for the Asia-Pacific at OANDA, saying both sides lacked the appetite for conflict.

He added the most likely outcome would be more severe sanctions on Iran, though he pointed out: “What is clear is that Saudi Arabian oil infrastructure is more vulnerable than thought, and a risk premium will be built into oil prices going forward.”

Analysts said the Fed would probably consider the Saudi attack’s possible impact on the economy and prices when deciding on its next monetary policy move this week, but tipped it to cut borrowing costs after its meeting on Wednesday.

Also providing some optimism was news that Chinese Vice Finance Minister Liao Min will visit the United States on Wednesday to “pave the way” for the higher-level talks planned for next month.

On foreign exchanges the aversion to riskier assets pushed the dollar up against high-yielding currencies, while the pound fought to recover from Monday’s losses.

Sterling dropped Monday after European officials said British Prime Minister Boris Johnson had offered no new, viable ideas to break the Brexit impasse during talks with EU chief Jean-Claude Juncker.

Investors are now awaiting a decision by the UK Supreme Court on whether Johnson’s decision to suspend parliament for more than a month was lawful.

HONG KONG — Oil prices saw a record surge on Monday after attacks on two Saudi facilities slashed output in the world's top exporter by half, fuelling fresh geopolitical fears as US President Donald Trump blamed Iran and raised the possibility of a military strike on the country.

Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 per cent — while WTI jumped more than $8, or 15 per cent.

Both contracts pared the gains as the day wore on but were still up nearly 10 per cent.

The attack — claimed by Tehran-backed Houthi rebels in neighbouring Yemen, where a Saudi-led coalition is bogged down in a five-year war — hit two sites owned by state-run giant Aramco and effectively shut down 6 per cent of the global oil supply.

Trump said on Sunday the US was "locked and loaded" to respond to the attack, but was in talks with Riyadh.

US Secretary of State Mike Pompeo said: "The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression."

Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.

But The New York Times reported that US officials had satellite images showing the attacks — possibly with drones and cruise missiles — had come from the north or northwest. That indicated they were sourced in the northern Persian Gulf, Iran or Iraq, rather than Yemen.

China on Monday called for the US and Iran to "exercise restraint".

"Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning," said Jeffrey Halley, senior market analyst at OANDA.

Trump authorised the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.

But the strikes raise concerns about the security of supplies from Saudi Arabia and elsewhere.

"The implications of these attacks are far-reaching and lasting, going well beyond the immediate disruption to albeit a very large portion of global output," said Neil Wilson, chief market analyst at Markets.com.

"It is a material escalation in the risks to supply and, in short, traders now worry that Saudi Arabian oil production can be swiftly and easily knocked out."

 Energy firms surge 

Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.

"One thing we can say with confidence is that if part of the reason for last week's fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton's sacking... and thought this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid," said Ray Attrill at National Australia Bank.

The surge in crude lit a fire under energy firms, with Hong Kong-listed CNOOC up 7.4 per cent and PetroChina 4.3 per cent higher. Woodside Petroleum rallied more than four per cent in Sydney.

However, airlines took a hit from the prospect of higher fuel costs. Cathay Pacific dropped 4 per cent in Hong Kong, Air China dropped 4.6 per cent in Shanghai and Qantas dived more than four per cent in Sydney.

Asian stock markets were mostly down after last week's rally that was fuelled by China-US trade hopes, while investors are awaiting a key Federal Reserve policy meeting hoping for another cut in interest rates.

Shanghai was marginally lower after data showed China's huge economy showed further signs of slowing last month, with retail sales, fixed-asset investment and industrial production all missing forecasts.

Hong Kong sank 0.8 per cent after fresh violent protests struck the city at the weekend, while Singapore shed 0.1 per cent and Jakarta sank 2 per cent. There were also losses in Mumbai and Wellington. Tokyo was closed for a holiday.

Sydney added 0.1 per cent, Seoul gained 0.6 per cent and Taipei was 0.7 per cent higher.

In early trade, London fell 0.4 per cent, while Frankfurt and Paris shed 0.6 per cent apiece.

On foreign exchanges, higher-yielding currencies dropped as traders shifted to safe-haven units such as the yen and dollar, while gold — a go-to asset in times of uncertainty — rose more than one per cent.

The pound held around seven-week highs owing to easing fears of a no-deal Brexit, with eyes on a meeting between Prime Minister Boris Johnson and European Commission chief Jean-Claude Juncker that was due later in the day.

RIYADH — A drone strike on two major oil facilities in Saudi Arabia has severely disrupted production and drawn allegations that Iran is responsible for what the US has called an “unprecedented attack on the world’s energy supply”.

Here is what we know about the implications of the strike on the Abqaiq plant, the world’s largest oil processing facility, and nearby Khurais, which hosts a massive oil field.

The attack took place as a five-year war rages in Yemen, pitting the Iran-linked Huthi rebels against a Saudi-led military coalition in a conflict that has raised tensions across the region.

Saudi energy infrastructure has been hit by the Houthis many times before, but this strike is of a different order, forcing the state-owned oil giant Aramco to temporarily suspend about half its total output.

However, the full extent of the damage and what weapons were used is not clear. Reporters were not allowed near the plants, where Saudi authorities swiftly beefed up security.

“This is going to focus attention on the Yemen war,” said James Dorsey, a Middle East expert at the S. Rajaratnam School of International Studies in Singapore.

Rather than being “somewhere in the backyard in a remote part of the Gulf”, the war is “starting to involve key assets,” he said.

The Houthi rebels in Yemen claim they sent a swarm of drones far across the border to carry out the strikes, in what would be their most ambitious and devastating attack after dozens of smaller-scale operations.

US Secretary of State Mike Pompeo blamed Tehran for the attack, saying there was no evidence it was launched from Yemen. But he did not explain how Iran was to blame or where the weapons came from.

Iran on Sunday dismissed the accusation as “meaningless”.

The Wall Street Journal cited unnamed sources as saying that Saudi and American officials are investigating the possibility that the strikes involved cruise missiles launched from Iraq or Iran.

The attacks, which have cut six per cent of the world’s oil supply, could drive up prices when markets re-open on Monday, but the impact will depend on how quickly the Organisation of the Petroleum Exporting Countries (OPEC) kingpin can restore production.

Aramco also said it would dip into its stocks to offset the disruption.

The incident could undermine investor confidence in Aramco’s looming stock market debut, a mammoth listing that the government hopes will raise up to $100 billion based on a $2 trillion valuation of the company.

If it does turn out that Tehran carried out the attack, it would pose a major national security headache for Donald Trump and potentially upend a nascent US softening on Iran. 

In June, the US president called off a strike on Iran and he recently said he believes the leadership wants to talk, fanning speculation that he may arrange a summit with his Iranian counterpart at the upcoming UN assembly.

The strikes will also escalate the bitter rivalry between Saudi Arabia and Iran, locked in a decades-old struggle for regional dominance.

Saudi de facto ruler Crown Prince Mohammed Bin Salman has said the kingdom is “willing and able” to respond to this “terrorist aggression”.

But Dorsey says a direct retaliation is unlikely, as “the Saudis do not want an open conflict with Iran”. 

“The Saudis would like others to fight that war, and the others are reluctant,” he said.

If the Houthis are found to be responsible, it would likely set back talks that Washington confirmed earlier this month had been launched in a bid to end the country’s devastating five-year war.

Saudi Arabia has splurged billions on military hardware including advanced fighter jets. But its arsenal has proved ineffective against the Houthis, a ragtag but highly motivated tribal militia that specialises in hit-and-run guerrilla tactics. 

Recent developments have also highlighted the potent threat posed by the Houthis’ steadily advancing weaponry, from ballistic missiles to unmanned drones.

While the kingdom’s oil wells, scattered over a vast geographical area, may be a difficult target, its various oil processing facilities are much more exposed.

The Abqaiq facility is the “most vulnerable” among them, according to the Washington-based Centre for Strategic and International Studies.

Aramco’s vast system of pipelines, pumping stations and ports along the Gulf and Red Sea are also at risk. A drone attack on two oil pumping stations in May forced a days-long shutdown.

BAGHDAD — Iraq on Saturday signed a $1.3 billion deal with German industrial conglomerate Siemens and Egypt's Orascom Construction to rebuild a major power plant complex in the ravaged city of Baiji, north of Baghdad.

The new deal is part of a broader energy road map that Iraq signed with Siemens earlier this year in a bid to pump 11 gigawatts (GW) into Iraq's crippled power sector.

The country currently generates around 15GW, far short of estimated demand of about 24GW. 

The Baiji 1 and 2 plants, as well as a massive oil refinery nearby, were destroyed in the three-year fight against the terror group Daesh after it swept across a third of Iraq in 2014.

Many of Baiji's neighbourhoods remain gutted, surrounding fields are littered with unexploded ordnance and the area is controlled by a complex web of paramilitary groups.

On Saturday, Iraqi Electricity Minister Luay Al Khateeb signed the deal in Baghdad with Siemens CEO Joe Kaeser and Orascom chief Osama Bishai. 

"This agreement worth $1.3 billion will add up to 1.7GW to the grid," Khateeb told reporters. 

Siemens said the plant renovation would take about 28 months, starting once the Iraqi Cabinet approves the contracts and a financing agreement is reached. 

Iraq's grid has been ravaged by decades of conflict and poor maintenance, causing chronic power cuts across the country. 

Iraq tops up its grid with electricity imported from neighbouring Iran, as well as using Iranian natural gas to feed its power plants. 

The US has granted Iraq a series of waivers from sanctions against Iran, allowing it to keep up its imports — providing it works to wean itself off them. 

US officials have urged Iraq to partner with American companies, including General Electric, to gain energy independence. 

Industry sources have criticised the move as putting unfair pressure on Baghdad to favour US firms. 

Kaeser on Saturday hinted that such pressure had eased and a "level playing field" had been achieved. 

"Time will tell, but otherwise somebody else would have been here signing today," he said. 

ABU DHABI — OPEC kingpin Saudi Arabia on Thursday led calls for oil producers to comply with output cuts aimed at stabilising a slumping oil market, as a gloomy new forecast blamed US-China trade tensions for depressed demand.

Riyadh has been shouldering the burden of existing production cuts, but other nations — notably Nigeria and Iraq — are accused of exceeding their quotas.

"Every country should live up to its commitments," new Saudi Energy Minister Prince Abdulaziz Bin Salman said as a committee of producers charged with monitoring the cuts and assessing the oil market opened talks.

Prince Abdulaziz told the Joint Ministerial Monitoring Committee (JMMC) meeting in Abu Dhabi that it was imperative to restore stability in the oil market where prices have slumped to below $60 a barrel.

"He highlighted OPEC's operating paradigm of inclusiveness. He stressed that every country counts regardless of its size and that every country should live up to its commitments," the Saudi energy ministry said in a tweet.

In a statement after the talks, the committee also emphasised compliance, saying that "equality, fairness and transparency" were essential.

Dubbed OPEC+, the 24-member alliance of cartel and non-cartel producers decided last year to cut output by 1.2 million barrels per day (bpd) from January 2019, to boost prices after they fell by more than 40 per cent.

The cuts were extended by nine months until the end of March but that move failed to invigorate the market.

United Arab Emirates Energy Minister Suheil Al Mazrouei said on Sunday that the group will do whatever necessary to stabilise the market, and that further production cuts could be considered.

However, he admitted the issue was not entirely in the hands of the world's top producers, with the market no longer governed by supply but being influenced more by US-China trade tensions and geopolitical factors. 

 Subdued outlook 

There was no good news from the latest International Energy Agency (IEA) monthly report, which said growth in global demand for oil is expected to remain subdued.

"International trade relations have further deteriorated in the past few weeks but US and Chinese officials announced that they would resume trade negotiations in early October," the Paris-based IEA said on Thursday.

"Trade disputes and rising uncertainty about the impact of the UK's possible exit from the European Union are reducing global growth through lower business and consumer confidence, supply chain reassessments, declining investment and direct reduction of trade."

Against the uncertain backdrop, the IEA left its oil demand growth forecasts for 2019 and 2020, lowered in its previous monthly report, unchanged at 1.1 million barrels per day and 1.3 million bpd.

Russian Energy Minister Alexander Novak said on Thursday that the OPEC+ alliance has managed in the past to "adapt and react to the changing market conditions".

Novak, whose country is the largest producer in the group, said producers are determined to achieve stability in the oil market.

The JMMC does not take decisions but makes recommendations for action which will be considered by the full OPEC+ ministerial meeting in December.

The Saudi energy ministry said on Twitter that Prince Abdulaziz's comment "underscores the key objective of the kingdom's oil policy, which is to achieve market stability & stresses the importance of maintaining a high degree of cohesiveness among OPEC and non-OPEC producers, led by Russia".

The prince was recently promoted to the pivotal role, replacing veteran official Khalid Al Falih as the top crude exporter accelerates preparations for the much-anticipated IPO of its energy giant Aramco.

A son of King Salman, and half-brother to de facto ruler Crown Prince Mohammed Bin Salman, he is the first member of the royal family ever put in charge of the kingdom's all-important energy ministry.

In his debut at the Abu Dhabi industry talks this week, Prince Abdulaziz — a veteran of the industry with decades of experience — has emphasised that existing Saudi energy policy will not change.

ABU DHABI  — In the vast air-conditioned halls of an Abu Dhabi conference centre, the world's much-vaunted transition to clean energy is the buzzword in sessions of a top industry gathering.

But many executives and officials from oil-dependent Gulf states insist that while the change to renewables is essential, fossil fuels remain the future at least for the next few decades, despite the urgent need to fight climate change.

The debate has taken centre stage at this week's World Energy Congress, with many officials calling for accelerating the process of moving to clean power sources and minimising carbon emissions.

Speakers addressed issues like the role of nuclear, hydrogen gas and other non-conventional sources of energy as a replacement for fossil fuels which currently account for over three quarters of the world's energy consumption.

However, delegates from oil-producing countries and particularly those in the Gulf argued that although the transition to clean energy sources must be supported, they will not be able to meet rising demand any time soon.

"For decades to come the world will still rely on oil and gas as the majority source of energy," said the head of Abu Dhabi Oil Co. Jaber Sultan.

"About $11 trillion of investment in oil and gas is needed to keep up with current projected demand," over the next two decades, he told the congress which was attended by representatives of 150 nations and over 400 CEOs.

Energy from increasingly competitive renewable sources has quadrupled globally in just a decade, but insatiable demand for energy particularly from developing economies saw power sector emissions rise 10 per cent, a UN report said last week. 

"All energy transitions — including this one — take decades, with many challenges along the road," the CEO of Saudi energy giant Aramco, Amin Nasser, said at the conference.

Nasser said his country supports the growing contribution of alternatives, but criticised policies adopted by many governments that do not consider "the long-term nature of our business and the need for orderly transition".

Addicted to oil 

Oil is still the lifeline for the Gulf states, contributing at least 70 per cent of national revenues across the region which has been cushioned by decades of immense profits from the flow of "black gold".

Gulf nations have invested tens of billions of dollars in clean energy projects, mainly in solar and nuclear.

Dubai has launched the world's largest solar energy project, with a price tag of $13.6 billion and the capacity to satisfy a quarter of the energy-hungry emirate's current needs when it comes on line in 2030.

But critics say the addiction to oil is a tough one to kick, particularly when supplies remain abundant and the massive investment in infrastructure necessary to switch to renewables is daunting.

"A global shift from dirty fossil fuel to renewable energy is economically, technically and technologically feasible... All that is missing is political will!" said Julien Jreissati from Greenpeace in the Middle East.

He said while the United Arab Emirates has put plans into action, "Saudi Arabia which has always made big announcements regarding their renewable energy ambitions is lagging behind as their projects and targets remain ink on paper.”

"There is no doubt that the world will leave oil behind. The only question remaining is when will this happen?"

Despite important technological advances made in the past decade, renewable energy sources still make up just around 18 per cent and nuclear adds another 6 per cent of the world's energy mix. 

In the past decade, the adoption of wind and solar energy picked up rapidly as the production cost plummeted to levels close to that of oil and gas.

But the Abu Dhabi conference saw calls for accelerated innovation and "disruptive" technology to speed the transition as the world prepares for global energy demand to peak between 2020 and 2025, according to the World Energy Council.

Estonian President Kersti Kaljulaid said that sustainable and environmentally friendly energy practices must be aligned with national and global economic policies in order to have the required impact.

"It makes more economic sense to apply all green technologies globally, and if this happens we might go to being CO2-free energy users 5 or 10 or 20 years quicker," she told the conference.

"I prefer that market forces, pushed by smart policymaking and legal space-setting, act quickly and save us all from the alternative."

ABU DHABI — Saudi Arabia’ energy company Aramco is ready for a two-stage stock market debut including an international listing "very soon" but the timing is up to the government, its CEO said on Tuesday.

Aramco has said it plans to float around 5 per cent of the state-owned company in 2020 or 2021 in what could potentially be the world's biggest stock sale.

The mammoth Initial Public Offering (IPO) forms the cornerstone of a reform programme envisaged by the kingdom's de facto ruler Crown Prince Mohammed Bin Salman to wean the Saudi economy off its reliance on oil.

It aims to raise up to $100 billion based on a $2 trillion valuation of the company, but investors have debated whether Aramco is worth that much and there have been repeated delays in the launch originally envisaged for 2018.

"We have always said is that Aramco is ready for listing whenever the shareholders make a decision to list," Aramco CEO Amin Nasser told reporters on the sidelines of the World Energy Congress. 

"And as you hear from His Royal Highness Prince Abdulaziz yesterday, it is going to be very soon. So we are ready — that is the bottom line," he said, referring to the newly appointed energy minister.

With the low oil price believed to be a factor weighing on their decision-making, he added however that the actual date would be a "government decision".

The government has not given any explanation for the delays, but apart from holding out for the big-ticket valuation they are also said to be concerned the IPO could bring intense legal scrutiny of the secretive company's finances and corporate inner workings.

Tokyo option 

The Wall Street Journal reported last week that Aramco was considering a two-stage process with a domestic debut and a subsequent international listing — possibly in Tokyo. 

"One of the primary listings is going to be local but we are also ready for listing outside," Nasser confirmed.

A Tokyo listing would be a setback for London, New York and Hong Kong, which have all vied for a slice of the business. 

Political uncertainty in Britain over its plan to exit the European Union and mass protests in Hong Kong have diminished their prospects, the Journal cited Saudi officials as saying.

Prince Abdulaziz Bin Salman was promoted on Sunday to the pivotal role of energy minister, replacing veteran official Khalid Al Falih, as the top crude exporter accelerates preparations for the much-anticipated IPO.

The appointment of Prince Abdulaziz, one of the sons of Saudi Arabia's King Salman, marks the first time a royal family member has been put in charge of the all-important ministry.

In his first comments since taking up the role, the minister on Monday endorsed oil supply cuts, saying in Abu Dhabi that they would benefit all producing nations amid an oversupplied market and sagging prices. 

Crude prices are currently moving around levels of $60 a barrel, compared with more than $75 a year ago, but were given a boost on Monday by the comments.

 Prices in decline 

The OPEC petroleum exporters' cartel and key independent producers are deliberating how to halt a slide in prices that has persisted despite previous cuts and US sanctions that have squeezed supply from Iran and Venezuela.

Abu Dhabi is also hosting this week a meeting of the Joint Ministerial Monitoring Committee of the OPEC+ alliance for a supply cut deal reached last year.

The ministers will consider fresh reductions, even though analysts are doubtful such a move would succeed in bolstering crude prices which have been badly dented by the US-China trade war.

The Aramco listing is key to Saudi's economic future. Its GDP grew by 2.4 per cent last year but the International Monetary Fund (IMF) said growth would fall to 1.9 per cent in 2019 due to substantial oil output cuts.

The IMF said that fiscal reforms, including a consumption tax and higher energy prices, have started to yield results but that more is needed to plug a chronic budget deficit.

The prospect of falling short of the $2 trillion valuation desired by Saudi rulers is widely considered the reason the IPO — previously scheduled for 2018 — has been delayed.

Earlier this month, Aramco said its first half net income for 2019 slipped nearly 12 per cent to $46.9 billion on lower crude prices.

It was the first time the company has published half-year financial results and comes after Aramco opened its secretive accounts for the first time in April, revealing itself to be the world's most profitable company.

FRANKFURT AM MAIN — The European Central Bank (ECB) is widely expected on Thursday to lower negative interest rates even further, and possibly bring back its multi-billion-euro quantitative easing programme.

Here are the monetary policy tools the Frankfurt institution has hinted at deploying in the coming months to battle the uncertainty — over trade tensions, Brexit, geopolitical clashes and emerging market woes — weighing on progress towards its price stability goal.

Interest rates 

The ECB has sunk interest rates to historic lows since the twin shocks of the global financial and eurozone crises, as it pursues its mandated target of inflation of just below 2 per cent.

While deciding in July to hold the rate it charges on banks' deposits at the present -0.4 per cent, officials said it could dive to "lower levels".

Such a move should encourage lenders to issue more credit and invest in the real economy rather than hoarding cash.

Meanwhile, the ECB is less likely to shift its main refinancing rate — the interest it charges on one-week loans to banks — from its present zero per cent level.

'Tiering' 

With an eye on complaints from banks that the negative rates were hurting their business model, ECB chief Mario Draghi promised six weeks ago that "if we are to lower interest rates, that will come with mitigating measures".

Among such action could be a "tiering" system to exempt some deposits from the harshest negative rate.

Sweden, Switzerland, Denmark and Japan have already adopted such a measure, slashing lenders' annual bill on excess liquidity, which for eurozone banks currently amounts to around 7.5 billion euros ($8.4 billion) — mostly paid by French and German lenders.

Cheap loans to banks 

In March, Draghi said the bank would offer a third series of cheap two-year loans between September 2019 and March 2021.

The institution gave banks the chance to borrow massive amounts at extremely favourable interest rates in schemes known as TLTRO I and II between 2014 and 2016.

The measure was another attempt to encourage lending to the sluggish real economy.

Banks, especially the more fragile members of the sector in Italy, leapt at the chance for low-cost liquidity.

ECB policymakers decided in June that, depending on how much the banks lend to the real economy, they could — as in previous rounds — even enjoy a negative interest rate as low as -0.3 per cent on their borrowings.

That would mean the central bank effectively paying them to borrow money.

Mass bond-buying 

When lower interest rates alone failed to restore growth and inflation, the ECB turned to a policy of mass purchases of government and corporate bonds, known as "quantitative easing" or QE.

Between March 2015 and December 2018, policymakers bought up 2.6 trillion euros of debt, mostly at a pace of tens of billions per month.

The aim: To flush newly-created money through the financial system and into the real economy to stimulate growth.

Central bankers credit the scheme with helping ward off deflation and create millions of jobs.

In July, the ECB signalled it could once again employ that tool, saying it has tasked officials to examine "options for the size and composition of potential new net asset purchases".

A possible relaunch of QE "remains the natural policy response in the absence of a sustained rebound in inflation expectations", Pictet Wealth Management Strategist Frederik Ducrozet said.

But a new round of bond-buying could require the ECB to relax a 33 per cent limit on the share of any one country's debt it can buy.

That, in turn, could bring new legal and political challenges down on its head, risking a repeat appearance before Germany's constitutional court over allegations of "monetary financing" — or the central bank directly footing the bill for state spending — which is banned under European treaties.