The stock markets aren’t sure what to do anymore about Donald Trump. As it turns out, many of the things the market thought would be devastating (trade war with China) weren’t as big of deal as originally thought. Add to that the fact that Trump changes his mind on a regular basis for no particular reason, and you have a stock market that just sort of guesses.
Big news today is that the Trump administration is pulling the waivers for countries over the Iran oil sanctions.
So, Trump decided he had some sort of goal with Iran that involved oil sanctions against Iran. Typically, this is what American Presidents do when they are upset with Iran. Rather than bombing them, you cut off their ability to sell oil
The catch is that the world oil market is really one big pool of suppliers and cutting any of the supply into that pool raises oil prices. Most countries, especially America, aren’t real fond of higher oil prices, so the sanction thing is sort of a double-edged sword.
When the Trump administration put its sanctions on Iran, they made sure to tell everyone, because that is how you make it look like you are doing something important about Iran.
However, they also extended a bunch of waivers to various countries, which allowed them to continue buying Iranian oil without any penalty. As you can imagine, this makes Iran feel a lot better about any sanctions, because the country doesn’t really care who it sells the oil to, so long as it gets nice, hard currency in exchange. This of course, also takes the teeth out of the sanctions, and since the total pool of oil and buyers doesn’t really change much.
What is new, is that many observers thought the U.S. would renew the waivers and let those countries keep buying Iranian oil. They did not.
So, now, theoretically, countries buying oil from Iran would be subject to market punishment, such as sanctions on them, or other pressure such as asset seizures.
But, this is Trump so….
- Oil prices are up… because sanctions… but will they stay… or will there be a “new deal”….
- Stock market went down… then up… because it only matters if the oil prices rise and stay higher but…
- Saudi Arabia may or may not pump more oil to absorb any Iranian production cuts…