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Collapse of Iranian Nuclear Deal Could Jolt Oil Market

Collapse of Iranian Nuclear Deal Could Jolt Oil Market

Thursday, 26 April 2018 10:46 AM Current | Bio | Archive

French President Emmanuel Macron suggested that President Donald Trump would pull out of the Iranian nuclear deal. Trump has set May 12 as deadline for strengthening the nuclear accord.

After Macron’s address to Congress, which by the way included many suggestions of the value of the international order, the dangers of nationalism and the benefits of keeping one’s word internationally, the French President told journalists: “My view — I don’t know what your president will decide — is that he will get rid of this deal on his own for domestic reasons. You will have probably, it’s almost sure, a period of tension in such a scenario. We have to accept that because there is no other option, and it’s the bet of your president that this period of tension could be fruitful because it could push them to move."

Macron later said he had "no insider" information on Trump’s decision regarding the future of the Iranian nuclear agreement, which continues to be endorsed by the United Nations and supported by all the other parties to it.

The so-called Iranian nuclear deal is one of the few areas of geopolitics that do matter to the financial markets because it potentially has a bearing on oil supply.

Of course, the oil market has factored in some of the risks that if the Iranian nuclear deal fails, but that may still provoke further market moves.

Highlighting U.S. economic data, new orders for key U.S.-made capital goods unexpectedly fell in March, weighed down by the biggest drop in demand for machinery in nearly two years, and a decline in shipments suggested business spending on equipment slowed in the first quarter.

But other data on Thursday showed the economy remains on a strong footing. The number of Americans filing unemployment benefits dropped to the lowest level in more than 48 years last week and the goods trade deficit tumbled in March on strong export growth.

The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, slipped 0.1 percent last month. Data for February was revised to show these so-called core capital goods increasing 0.9 percent instead of the previously reported 1.4 percent jump.

Capital goods reports aren't bad at capturing investment in, let’s say in the oil industry. What it is less good at is the changes in the what constitutes investment in the wider economy these days.

U.S. companies have become more and more dependent on e-commerce over the past 10 years with a truly dramatic escalation of the business-to-business e-commerce.

At the same time, U.S. companies have spent proportionally less and less on technology and software capital spending.

This paradox is accounted for by consumer spending “doubling” as capital spending. For example, I bought an iPad for and recorded it on an Ap I paid for. Consumer spending is used as capital spending nowadays.  

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The oil market has factored in some of the risks that if the Iranian nuclear deal fails, but that may still provoke further market moves.
iranian, nuclear, deal, oil
Thursday, 26 April 2018 10:46 AM
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