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Takeaway: Trump's UN speech is latest signal of US Iran deal exit. Mid-October decision is catalyst for taking 1M b/d of Iran crude off the market.

Iran Nuclear Deal End in Sight - hira

In his speech to the United Nations General Assembly, President Trump once again made clear his opposition to the Iran nuclear deal. Calling it “the worst”, “one-sided”, “an embarrassment to the United States”, and “cover for the eventual construction of a nuclear program”, Trump added “I don’t think you’ve heard the last of it – believe me.”

The President’s UN speech is the latest signal of the impending US exit from the Iran nuclear deal. The deal comes up for the quarterly certification of the parties compliance in mid-October.

Hedgeye energy policy subscribers and regular consumers of our analysis will note that we have written extensively on the topic and made the call on the Iran deal exit as far back as July 2016. Here are a few of our key past notes:

  • July 19, 2016 – Iran nuclear deal emerging as a potential election risk for energy markets
  • December 28, 2016 – Oil Alert: Trump signals beginning of the end of “horrible Iran deal”
  • May 26, 2017 – Donald of Arabia: Trump’s successful Middle East trip raises risk to Iran nuclear deal and oi market

We believe the Trump Administration will deny Iran’s certification and exit the deal on or about October 15 at the next quarterly certification deadline. We expect US nuclear sanctions will be reinstated shortly thereafter.

Renewed US nuclear sanctions on Iran will result in major implications for oil markets. Iranian crude exports of at least the added 1 million b/d over the last year would likely be removed from the market and thus spike oil prices.

The EU and other parties will likely certify Iran’s compliance and therefore not join the US in re-imposing nuclear sanctions. But EU energy companies, with big US operations, that buy Iranian oil will be subject to US sanctions and create a major obstacle for the EU policy position. Moreover, should Iran respond by restarting its nuclear program, the EU will be under enormous pressure to join with US sanctions to isolate Iran.