CNBC.com
President Donald Trump's decision to pull the U.S. out of the Iran nuclear deal on Tuesday could have widespread global implications ranging from the price of oil to the future of Tehran's nuclear ambitions. The U.S. withdrawal from the deal could stress already strained diplomatic relations with a number of key allies, including European Union leaders in Germany, France and the United Kingdom, all original parties in the 2015 accord.
"France, Germany, and the UK regret the U.S. decision to leave the JCPOA," Macron said in a tweet. "The nuclear non-proliferation regime is at stake."
As part of the original deal, a host of countries, including Russia and China, agreed to periodically suspend sanctions on Iran so long as the Iranians complied with the terms of the deal, including regular international inspections.
But the U.S. departure from the international pact isn't the first time Trump has split with overseas allies or his presidential predecessors. The U.S. ruffled the feathers of European partners earlier this year after Trump approved 25 percent tariffs on foreign steel and 10 percent tariffs on foreign aluminum.
In response, the European Commission said it would respond "firmly" to proposed U.S. import duties, with goods like clothing, orange juice and blue jeans as likely targets.
"We will put tariffs on Harley-Davidson, on bourbon and on blue jeans — Levis," European Commission President Jean-Claude Juncker told German television in March.
"We are here and they will get to know us. We would like a reasonable relationship to the United States, but we cannot simply put our head in the sand."
For his part, Obama weighed in on Trump's decision, saying that the move to pull out is a "serious mistake."
Leaving the deal could also have ripple effects on the oil market, given Iran's role as OPEC's third-largest oil producer. Though Brent crude has posted a sharp rally in recent days on speculation of a withdrawal and tighter supply, the severity of any sanctions could affect how much crude fluctuates in the coming weeks.
Oil prices held lower Tuesday following Trump's announcement, with West texas Intermediate crude settling down $1.67, or 2.4 percent, just above $69; Brent crude slipped 47 cents, or 0.6 percent, to $75.71.
Possibly calming fears, the Treasury Department clarified that the forthcoming sanctions will be reimposed subject to certain 90-day and 180-day wind-down periods.
"President Trump has been consistent and clear that this Administration is resolved to addressing the totality of Iran's destabilizing activities," said Treasury Secretary Steven Mnuchin.
"We will continue to work with our allies to build an agreement that is truly in the best interest of our long-term national security."
Finally, a U.S. exit could leave the future of Iran's nuclear program in limbo. By refusing to waive sanctions without proving that Iran is violating the deal, Trump would effectively drop the agreement made by the United States.
Iran had explored aspects of a nuclear program, including enriching uranium, gathering plutonium and researching methods of bomb-making before the 2015 agreement. Though Tehran contends that its nuclear program was always designed for peaceful purposes, its building of a plutonium reactor in northwestern Iran also drew red flags.
In spite of the U.S. incumbent's threats to withdraw, President Hassan Rouhani stated that Iran had a plan to counter any move made by Trump when it comes to the deal, Reuters reported. Though Trump was widely expected to withdraw, Rouhani said on Tuesday that Iran would continue to seek "constructive relations with the world," despite potential sanctions.
Oil closes down 2.4% on extreme volume after Trump pulls US out of Iran deal
CNBC.com
Oil prices pared losses on Tuesday after President Donald Trump announced that the United States will withdraw from the 2015 Iran nuclear deal.
U.S. West Texas Intermediate crude oil settled down $1.67 a barrel, or 2.4 percent at $69.06, well off a 4.38 percent decline earlier in the day. The settlement was delayed by nearly an hour due to extremely high trading volume. The contract rose as high as $70.84 on Monday and ended the session above $70 a barrel for the first time since November 2014.
International benchmark Brent crude fell 47 cents , or 0.6 percent, to $75.71, also paring back an earlier decline of 4 percent. Brent touched $76.34 on Monday, its best level since Nov. 27, 2014.
In President Trump's announcement Tuesday, he said the U.S. will withdraw from the Iran nuclear deal forged under the Obama administration and restore sanctions on Tehran suspended under the 2015 accord.
"We will be instituting the highest level of economic sanction," Trump said. "Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States."
Iran is OPEC's third-largest oil producer and currently exports about 2.5 million barrels a day. Renewed sanctions could crimp those shipments at a time when global oil supply and demand have essentially balanced out. That increases the risk that the market could swing into undersupply and send oil prices higher.
In a statement immediately following the president's annoucement, Treasury Secretary Steven Mnuchin said in a prepared statement that "Sanctions will be reimposed subject to certain 90 day and 180 day wind-down periods. At the conclusion of the wind-down periods, the applicable sanctions will come back into full effect."
However, prices backed off Monday's highs after Trump tweeted that he would announce his decision four days before a deadline spelled out in the nuclear deal.
The tweet convinced some investors that the worst of the market's fears — that Trump will move quickly to impose sever sanctions — won't be realized, according to John Kilduff, founding partner at energy hedge fund Again Capital. Instead, some traders are now anticipating a "Trumpian half measure," he said.
"I don't think he'll go much further than that," Kilduff said. "We're pulling out of the deal, but he's going to hold off on reimposing sanctions until he can have an opportunity to work out some other sort of arrangements with Iran and the allies themselves."
A CNN report on Tuesday appeared to at least in part confirm that expectation. Sources told the network it could take months for the sanctions to take effect as the administration develops guidelines for companies and banks.
Congressional sources told CNBC the administration plans to wind down various aspects of the deal over 90- or 180-day periods.
Trump warned earlier this year that he would pull out of the nuclear accord unless he could reach a deal with Britain, France and Germany to toughen the terms of the agreement. That deal has not emerged.
The impact of renewed sanctions on oil flows will depend in part on how Washington chooses to implement them.
However, analysts say that lack of international support for renewed U.S. sanctions means the measures will likely only remove 300,000-500,000 barrels a day of Iranian crude from the market. That compares with 1 million-1.5 million barrels a day under President Barack Obama.
The oil market is vulnerable to a sell-off because investors have taken out a record number of long positions in crude futures in recent months. Investors could unwind these long positions, or bets that oil prices will keep rising, if Trump's announcement on Tuesday eases geopolitical concerns.
"A de-escalation of the geopolitical tension is likely to trigger an outflow from investors, reducing significantly whatever risk premium is embedded in prompt prices, given that investors are holding near-record net long positions," Edward Morse, global head of commodities research at Citi said in a recent research note.
The continued deterioration of Venezuela's economy, underpinned by a drop in its lifeblood crude production, has helped to underpin crude prices.
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