A black swan could be surfacing in the oil markets

Oil prices sharply extended gains on Wednesday after U.S. National Security Advisor Michael Flynn said the White House is putting Iran "on notice." That raised concerns President Donald Trump could take actions that would hobble Iran's efforts to revive its oil and gas industry, spark conflicts along oil supply routes and ultimately drive crude prices higher.
Flynn said the warning is a response to Iran carrying out a ballistic missile test this week and its support for Houthi rebels in Yemen's civil war. During a White House press briefing, he called agreements struck by the Obama administration, the United Nations and Iran "weak and ineffective."
Last month, Barclays included the risk that "Iran/US rhetoric escalates and leads to more Iranian ballistic missile testing" as one of 13 possible black swan events for markets in 2017. In a research note, Barclays said there is "significant legislative support" for keeping the nuclear deal in place, but warned that geopolitical tension may dampen investment in Iran's energy industry.
"We do not believe that the reimposition of sanctions would lead to an abrupt cut in Iranian exports, but the threat of new US sanctions will likely slow the pace of investment needed for Iran's oil sector to mitigate the decline from existing oil fields," Barclays said.
Heightened tension may have a short-term impact on prices due to the threat of confrontations in the Strait of Hormuz, a key oil supply route in the Persian Gulf where Iran's Revolutionary Guards and U.S. warships have clashed, Barclays said.

Tensions are already high. Iranian leaders accused the United States of violating the nuclear deal after President Barack Obama allowed Congress to extend unilateral sanctions on Iran. Those sanctions relate to different issues than those the nuclear accord addressed.
Lipow Oil Associates President Andy Lipow noted that oil prices had already been moving higher on signs that OPEC and Russia are delivering promised output cuts. But Flynn's comments only add to bullish oil price sentiment, he said.

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