Lifting Iran’s sanctions sent several world economies into free-fall and dropped currency values and oil prices Monday.
The International Atomic Energy Agency (IAEA) announced Saturday Iran fulfilled its requirements outlined in the Joint Comprehensive Plan of Action (JCPOA), or Iran nuclear deal. The milestone is known as “implementation day” and was quickly followed by Secretary of State John Kerry’s confirmation announcement. (RELATED: Iran Sanctions To Be Lifted, $100 Billion To Be Released Imminently)
Reports claim Iran plans to manufacture as much as 500,000 barrels of oil per day, which will inevitably lead to another price drop in an already saturated oil market. Stock prices across the Middle East took a nose-dive Sunday in reaction. Dubai’s DFM General Index saw a 4.8 percent drop and Saudi Arabia’s Tadawul All Share Index fell by 7 percent, the lowest in five years. Iran’s stock, however, saw a 1 percent increase, adding to an already impressive 6 percent total gain since the start of 2016.
Oil markets saw an immediate impact from the announcement, with prices of Brent crude oil dropping to $27.67 on the Asian market. Prices in London followed suit, briefly dropping below $28 per barrel, a historic 12-year low. Brent crude is now selling at 43 percent cheaper than it was just one year ago.
“The likely increase of Iranian oil production could not have come at a more unfavorable point in time, with the oil market being oversupplied and renewed economic concerns,” says Giovanni Staunovo, an analyst with UBS Group AG, in a report.
John Gay, an editorial staffer with the National Interest who covers Iranian issues, is more measured in his analysis of Iran’s re-entering of the global oil market. “The [Iranian] oil ministry has said it has suffered a long time from a lack of investment,” says Gay to the Daily Caller News Foundation, “production is going to take tens of billions of dollars to bring up.”
The damage has not been limited to countries in the Middle East. Britain’s FTSE has seen a loss of o.4 percent, Japan’s Nikkei 225 went down o.54 percent and China’s Shanghai Composite Index went down as low as 0.4 percent throughout the day.
Currency markets also fell victim, in particular the Russian ruble which saw just under a 2 percent drop in value against the U.S. dollar today.
Iranian officials have been hailing the sanction lift and appear to be optimistic for the future of the Iranian economy. “The country’s industry must form around the oil industry and the Ministry of Petroleum has plans available in oil, gas, and petrochemical fields worth 200 billion dollars,” says Iranian Vice President Eshaq Jahangiri to reporters Monday.
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