Market Overview

US Restores Sanctions On Iranian Shipping, Banking, Energy; Grants 8 Country Waivers

US Restores Sanctions On Iranian Shipping, Banking, Energy; Grants 8 Country Waivers

The U.S. is targeting Iran’s energy, banking and shipping industries with the restoration of all sanctions previously lifted under the 2015 nuclear deal, Secretary of State Mike Pompeo announced Monday. The campaign is meant to accelerate Iran’s economic decline as part of the American exit from a 2015 nuclear deal. 

“Our objective is to starve the Iranian regime of the revenue it uses to fund violent and destabilizing activities throughout the Middle East and indeed throughout the world,” Pompeo said at a press conference.

Who Gets Hurt

Companies that continue to do business with Iran risk heavy penalties and sanctions of their own. Some U.S. allies have secured short-term exemptions for crude oil.

The U.S. has issued temporary allotments to China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey to protect the global oil market. It has also granted Iran temporary waivers to allow continuation of three non-proliferation projects, which ensures oversight over civil nuclear activity.

The Nature Of Exemptions

Height expects most waivers to be “in place only for a minimal amount of time,” as the Trump administration prevents spikes in oil prices ahead of midterm elections.

“We think India will receive the largest and longest-term waiver to continue importing Iranian oil,” Height's analysts said in a note.

The firm predicts that China’s waiver will last only through November — ahead of Trump’s meeting with Chinese President Xi Jinping.

“We still expect that ultimate Chinese sanctions compliance will rely on progress in trade talks, and further waivers will likely be a key negotiating point,” according to Height. “We believe Trump will use as negotiating leverage the prospect of additional waivers for China, and he may offer waiver extensions in exchange for other concessions.”

The United States Oil Fund LP (NYSE: USO) and the Energy Select Sector SPDR (NYSE: XLE) traded up 1 percent Monday morning.

Related Links:

After A Sell-Off, What's Next For Oil?

Expert: Iranian Sanctions, Trump Demands Make For 'Murky' Oil Market


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