Donald Trump has vowed to tear up the "disastrous" Iran nuclear agreement early in his term and would seek to renegotiate a better deal."
So, here’s the billion dollar question.
Is this toothless campaign rhetoric … or a significant risk to the oil market?
Hedgeye Senior Energy Policy analyst Joe McMonigle thinks it’s the latter. As McMonigle has pointed out before, if Trump re-imposes Iranian sanctions, it could result in removing roughly 1 million barrels a day of Iranian crude from global oil markets. This in turn would boost oil prices and spur U.S. production.
This would obviously have major ramifications for oil markets.
McMonigle said on a recent institutional research call he thinks Trump is seriously considering ripping up the Iranian deal. It may even be a top priority for strategic, as well as political, reasons:
“I think it’s going to rank pretty high. A lot of focus by him and his team will be to do things that are completely within his control to have an immediate impact and also to show progress because he said Congress doesn’t do anything and he is going to change things. This is an issue where he can do it all on his own.”
Furthermore, Trump has broad-based support in both Republican-controlled houses of Congress.
“This is not some crazy Trump thing that he said during the campaign. Pretty much every Republican who ran said that they would abandon the Iran deal. I think Congress itself has seen bipartisan and growing support to re-impose sanctions.”
To be sure, this is the policy topic to watch and one that will have big consequences for oil markets. For more, click here to watch McMonigle discuss the key energy-related policy issues to watch coming out of election 2016, including the Iran nuclear deal, Keystone pipeline and clean power policy.
