Iran Deal: More Fire, More Fury, Pure Trump

Withdrawing from the Iran deal means cancelling waivers of pre-existing sanctions, which will impose penalties on banks worldwide in order to shut down Iran’s oil exports. This potentially takes as much as 2 million barrels per day out of a global oil market in which there is little spare capacity anywhere except Saudi Arabia, which has already indicated it may help. US shale producers can’t help until port capacity bottlenecks are solved. The sanctions won’t come into effect for 180 days, during which the door is open to renegotiate the Iran deal, and for countries to get exceptions and extensions as they did with the steel and aluminum tariffs. We reiterate our call for a higher trading range for oil, and likely overshoots. Like North Korea denuclearization and China trade reform, this is another high-return and high-risk Trump negotiation. Markets seem to be getting used to that. But the low-vol days of 2017 are long gone.