Iran Sanctions Looms Large Over Oil

Source-Forbes- Speculation is rising over whether President Donald Trump will decide to re-instate economic sanctions on Iran. The deadline for his decision is supposed to be May 12. For more than two years the President has said this is the worst deal ever" but lately he and has administration have kept everyone guessing about what they will do. And they have sometimes been quite cryptic. The President almost teased the press during his Tuesday press conference with French President Emanuel Macron when he said nobody knows what Im going to do on the 12th." And perhaps that speculation is just what President Trump wants . Originally sanctions were lifted after the Obama administration led a team of six nations in negotiations with Iran to incentivize Iran to end its nuclear weapons plans. The deal reached in the summer of 2015 is called the Joint Comprehensive Plan of Action (JCPOA). Its purpose ostensibly is to improve global safety by preventing a prime supporter of terrorism (the Iranian government) from becoming a nuclear power. The newly confirmed secretary of state Mike Pompeo will surely discuss this security issue when he visits Israel and Saudi Arabia this weekend. However the economic aspects of the deal are also crucial and we are seeing these economic elements play out as we anticipate the Presidents decision. Impact on Short Term Oil Prices If the President reinstates sanctions about one million barrels of oil per day could be taken off the global market. The result would be higher oil prices even though that one million barrels only accounts for less than 2 of global oil production. The psychological impact of limited exports from Iran would be enough for hyper-aware traders. However there has been much speculation over the last few weeks that the President would reinstate sanctions and as a result the price of oil has already risen. In fact the markets may see a greater swing if the President does not act as the price would fall.