Analyst Craig Erlam at Oanda –
It’s been a relatively positive start to trading in Europe on Wednesday, with much of the attention falling on US President Donald Trump’s decision to withdraw from the Iran nuclear deal.
Oil is back trading at three and a half year highs this morning after Trump confirmed that the US will be withdrawing from the Iran nuclear deal and sanctions will be restored. The question now is how restrictive the sanctions will be on the Iranian economy and its ability to produce and export oil given that the UK, Germany, France, China and Russia remain committed to the deal.
Oil has been rallying for days in response to rumours that Trump would announce the withdrawal, which clearly suggests that traders believe the sanctions will further tighten global supply at a time when some of the world’s largest producers have already significantly reduced inventories. There is clearly the potential for these countries to fill the void left by the sanctions but if it aids their cause then they’ll likely opt against it.