Big headlines to watch out for as US sanctions hit Iran

The first sanctions went into effect today

Heavy financial sanctions went into effect today with oil sanctions set to begin in November. In today's move, the purchase of US dollar banknotes by the Iranian government: Iran's trade in gold and precious metals; the sale or transfer on industrial goods to and from Iran; the purchase or sale of Iranian rials; the issuance of sovereign debt; and on Iran's automotive and airline sectors were all hit.

Now we're watching for how Iran and the rest of the world reacts.

Themes to follow:

Iran nuclear programs

Iran halted or curbed nuclear programs as part of the JCPOA but now may restart them. They could once again say these are nuclear programs for civilian purposes but may simply drop that charade and say they're developing nuclear weapons while withdrawing from the non-proliferation treaty. Either would be seen by the US as a major provocation.

Who buys the oil

Under the sanctions from 2011-2016, many waivers for Iranian oil were given and while exports were curbed, the country still produced 2.5 million barrels per day. This time, the US is talking about a harder line so that may make finding buyers more difficult. At the same time, other JCPOA partners don't want sanctions and Europe is trying to find a way for its companies to continue to do business in Iran without facing US repercussions. If Europe (or someone else) is able to facilitate continued trade in oil, then the impact on the market will be less than feared. Given the US control of the financial system, that's a longshot but it will be the first domino to fall.

Sea Lanes

Iran has threatened to block the Straits of Hormuz, shown here.

That would be tough with the US navy in the mix but it could certainly cause disruptions. This is an area where miscalculations could lead to shots fired and things getting out of control. At the moment, that's something that no one seems to want but Saudi Arabia may also sense this US administration is its best hope at dealing a devastating blow to its rival.

Source: Forexlive

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