Trump plans to back out from the nuclear deal with Iran. This deal involved Germany, China, France, Russia, the United States, the United Kingdom, and the European Union. The previous US President, Barack Obama, has urged to make this framework agreement possible in 2015, which the US Congress heavily opposed.
The deal limited Iran’s nuclear energy usage and development. The main goal of the agreement was to prevent Iran from making nuclear weapons.
The fact that the deal was one of Obama’s achievements during his tenure motivated Trump to undo it. Aside from that, he believes that the deal made the US too lenient on the sanctions that it imposed to Iran. The recent actions of Iran that caused it to allegedly break some of the agreements only aggravated the situation.
The European Union’s chief of foreign policy, Federica Mogherini, advised that Iran did not make any violations against the agreement. She also stressed that the United States cannot amend or renegotiate the contents of the framework agreement.
US EIA ranked Iran as the fourth country to have the biggest proven oil reserves. Any event that influences the country or any action it does directly affects the oil market. Since late last year, Iran has been struggling. Its currency’s value decreased by more than 30%. Unemployment is still at an all-time high.
After Trump became president of the United States, Iranians started fearing for their futures. And if Trump continues his plan on imposing harsher sanctions to the country, Iran’s oil market will crash. One of the possible new sanctions is mandating international oil companies to avoid buying oil from Iran.
Around 500,000 barrels of Iranian oil will disappear from the market a few months after Trump announces his verdict on Iran. West Texas Intermediate is already selling a barrel for $70 when rumors about Trump’s action spread. Oil players and companies expect an additional $7 per barrel once Trump rolls out the sanctions.
Yet people working in Iran’s oil sector are confident about the market. They believe that even if the United States exits the agreement or imposes additional sanctions, they will still operate and profit normally.
One should note that the demand for oil has been continually increasing. And with Venezuela, having the biggest proven oil reserves in the world, experiencing political uproar that caused its oil exports to lower, expect that the only direction for oil prices to go will be up.