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U.S. Iran Dispute

June 25th, 2019

International relations have not been the most positive news headlines on our media outlets in recent weeks, and recent developments with Iran have not changed that one bit. Our White House administration has been involved with trade disputes with multiple countries recently, with China at the top of that list. Now, we are facing possible conflict with Iran, one of the worlds leading oil exporters. Not only is this dispute affecting the economics of both countries, but there has also been physical conflict involved.

The Trump White House has imposed further sanctions on Iran. This came in a time where the standings between both administrations were in a less than friendly standing. Trump withdrew from the nuclear deal in 2015, while at the same time reinstating sweeping sanctions on the on the country shortly after. These sanctions have affected their economy drastically, while they are already in a financial peril. America has ceased the purchase of Iranian iron, steel, copper, and aluminum. Not only this, but waivers that allowed 8 countries (including China & India) to import Iranian oil, despite the U.S. sanctions. These sanctions are intended to put the pressure on Iran to prevent them from obtaining nuclear weapons. Trump states that he is ready and willing to maintain the pressure if Iran doesn’t change course. Needless to say, this did not bode well with the government and people of Iran. And the retaliation, has been severe.

The straight of Hormuz has been the location for six attacks on oil tankers of outbound barrels, as well as an unmanned U.S. drone. Trump halted an attack nearly ten minutes before the strike was to take place, due to the fact that the amount of lives lost would be disproportionate response to an unmanned drone being shot down into the water. Although, this conflict was avoided, the attacks on the oil tankers have increased tension. Especially because Iran’s supreme leader Ayatollah Ali Khamenei does not want to continue talks with President Trump or his administration.

Cailin Birch, global economist at the Economist Intelligence unit, states that Iran’s oil revenue has been cut by 2/3’s. She estimates that they were at 10 – 15 million barrels per week. At this point her firm has been looking at 4 – 5 million per week. With oil being the largest form of revenue for Iran, this conflict has been in no way kind to their economy.  In light of these recent sanctions, Iranian oil may be suffering, but U.S. oil companies such as West Texas Intermediate, jumped 10%. This is the largest gain since December of 2016. The economy in America may not be directly affected in a negative manner. But that doesn’t mean that it won’t eventually, in one way or another. Keeping an eye on this situation can keep you informed on how you and your finances may change based on these developments. Remember, Plan Smarter Live Better.