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…
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.
May 12th, 2019 – Near the strait of Hormuz, four oil tankers are attacked (two Saudi, one Emirati, and
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.
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.
June 24th, 2019 – President Trump Signs executive orders imposing financial sanctions on Iranian
June 25th, 2019 – Me writing this:
All jokes aside, what does all this mean for the United States and Oil in general?
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?
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!