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The Rising US-Iranian Conflict: Causes, Major Events, and Possible Effects

I think it is important to explain the events leading up to the current Iranian tension, as well as what that tension could mean for the future. There is no great segue into this, so without further ado…

Leading events:

May 2018 – It is announced that the US will pull out of the 2015 Iran Nuclear deal and a “maximum 

                   pressure” campaign is launched with intention on re-negotiating the nuclear deal.

August 2018 /November 2018 /April 2019 – New sanctions are implemented on Iran.

May 5th, 2019 - National Security Advisor John Bolton releases a statement regarding potential Iranian  attacks.

May 8th, 2019 – Iran announces they will increase uranium production.

May 9th, 2019 – It is reported Defense Secretary Patrick Shanahan has a plan to send in 120,000 U.S.

                          Troops in the event of an Iranian attack.

May 10th, 2019 – U.S. Sends a warship and other military equipment to the Middle East.

Big escalations:

May 12th, 2019 – Near the strait of Hormuz, four oil tankers are attacked (two Saudi, one Emirati, and

                            one Norwegian).

May 14th, 2019 – Multiple Saudi pumping stations are attacked by armed drones. Houthi rebels hiding in

                            Yemen claim responsibility.

May 15th, 2019 – Partial Evacuation of US embassy in Baghdad ordered.

June 13th, 2019 – Two more Tankers (one Japanese, one Norwegian) are assaulted Strait of Hormuz

                              while diplomatic discussions take place in Tehran.

June 17th, 2019 – Iran announced that it would surpass the uranium enrichment levels stipulated within

                             the 2015 nuclear deal in ten days.

 

The Drone:

June 20th, 2019 – Iran shoots down a United States drone it claimed was invading their airspace. The U.S.

                            provides evidence that the drone was in international waters.

  • President Trump approves airstrikes of strategic Iranian targets, but the strike is ultimately called off.

June 24th, 2019 – President Trump Signs executive orders imposing financial sanctions on Iranian

                             leaders.

June 25th, 2019 – Me writing this:

                            June Current Events - Texas Flange              

All jokes aside, what does all this mean for the United States and Oil in general?

Short Term?

As June 2019 concludes, the anticipated conflict between the U.S. and the Middle East has prompted international Brent Crude to climb ~5%, while concurrently West Texas Intermediate climbed more than 10%. (WTI’s biggest monthly gain since Dec 2016)

While WTI and Brent crude appear to be trading higher than Pre Iran-Conflict numbers, will this trend hold as we move into July?

Long Term?

Neither Country seems to be gunning for an all-out brawl, but further escalation may be inevitable.

While a factor, Iran is but a small part of a much larger equation that dictates oil pricing. Ultimately Supply/Demand will dictate the future price of oil and uncertainty is likely to lead to volatility.

Keep an eye out for the July Check in!

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