The US has placed sanctions on Iran and oil investors should be watching

by 11 May, 2018

The US has placed its first set of sanctions on Iran following the axing of the nuclear deal. The Treasury department imposed sanctions on 6 people and 3 companies it said had funneled millions of Dollars to the Iranian Revolutionary Guard’s elite Quds force.

The Treasury also accused Iran’s central bank of trying to help the group access US Dollars held in foreign banks in the UAE through a large-scale currency exchange network.

This is likely to be the first of many new sanctions from the US, especially given that the Quds force were behind the attack on Israeli forces in the Golan Heights this week, which prompted a huge retaliatory strike by Israel against Iranian military infrastructure inside Syria.

President Trump and Israeli leader Benjamin Netenyahu have a close relationship, and with Iran being boxed into a corner by 2 major US allies (Israel, Saudi Arabia) and the US itself, there’s no telling how it will react.

On top of this, Secretary of State Mike Pompeo will begin talks in the next few days to try and pursuade European allies to press Iran to return to the negotiating table over its nuclear and missile programs. The Iranian leadership will likely be extremely frustrated by this play by the US, as they argue they kept up their side of the nuclear deal in accordance with its standards. They have now been undermined by the very country which promised them a pass to pursue nuclear enrichment without punishment.

Trump’s decision has given grace periods of 90 days to six months for companies to wind down their trade with Iran.

The tension in the Middle East has been the key factor driving oil prices towards $80 a barrel, but the rally cooled a little today.

If Iran refuses to bow to pressure, the US may get even tougher in its approach, potentially going straight for the jugular and cutting its oil exports. This again would boost prices, so if you like trading oil products, keep an eye on this story – because it’s going to be the key narrative affecting prices in the next few weeks.

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