Oil market jitters as Trump threatens Iran deal withdrawal

Oil prices are near a three year high as fears of a new embargo on Tehran, as Trump makes an announcement on an Iran nuclear deal on Tuesday.

MENA

2 min read

The New Arab

08 May, 2018

Oil prices dipped slightly on Tuesday [AFP]

Oil prices dropped slightly on Tuesday, with fears that President Donald Trump will pull the US of out of a nuclear deal with major producer Iran.

Prices have peaked to a three-and-a-half year high with some saying the possible pull-out of a nuclear deal could lead to a "perfect storm" for higher prices following Trump's announcement on Tuesday.

"Oil has raced higher recently on the back of concerns that President Trump will exit the US from the Iran nuclear deal and that this would then lead to a further deterioration in the situation in the Middle East not to mention the disruption to oil supplies of Iran's production," Greg McKenna, chief market strategist from AxiTrader told AFP.

Fears that the US could slap new sanctions on Iran - and the regional turmoil it could provoke - have led to questions regarding future oil prices.

Iran has said Washington will regret it "like never before" if Trump walks away from the deal.

"The oil market has priced in the high likelihood of Trump withdrawing from the nuclear deal with Iran. If he is going to impose sanctions similar to those the US had in 2012, that would likely cause a shortage in oil," said Tatsufumi Okoshi, senior commodity economist at Nomura Securities.

US crude futures last traded at $70.11 per barrel, down 0.9 percent from Monday’s settlement price.

Others believe prices could sink further with the end of the Iran nuclear deal.

Stephen Innes, head of Asia-Pacific trade at OANDA, said "we could be on for significant knee-jerk reaction (sending prices down) if the president walks back the more boisterous elements of hawkish Iran rhetoric".

The 2015 nuclear deal was agreed between Iran and world powers - including the US - which saw Tehran curb its nuclear ambitions in return for sanctions relief.

Trump announced on Twitter on Monday that he will make announcement on his decision whether to continue with the nuclear deal.

"I will be announcing my decision on the Iran Deal tomorrow from the White House," he wrote Monday afternoon.

As the deadline looms, Iran's President Hassan Rouhani said on Monday Tehran would be willing not to abandon the nuclear deal even if the US pulls out, providing the EU offers guarantees that Iran would keep benefiting from the accord.

Agencies contributed to this article.