Iran is set to flood the international markets with oil
An estimated £27 BILLION has been wiped off investments today after markets slumped to historic lows in anticipation of the rogue gulf state’s rehabilitation into the global economy.
Iran, for so long a pariah on the international stage due to its controversial nuclear programme, is set to flood the world oil market with millions of barrels of crude oil after being welcomed back in from the cold by the US.
Financiers fear that the huge influx could severely depress already rock-bottom prices, swamping global stockpiles at a time when countries are already drowning in excess supply.
The Islamic Republic has vowed to return its oil production to pre-sanction levels, with estimates suggesting Tehran will add a further 500,000 barrels a day to the world's bloated stockpiles within weeks.
Traders on European and US markets including the FTSE 100 and Dow Jones were tonight bracing for the fall-out, with the financial shockwaves from the Middle East expected to have a significant impact in London and New York when the markets open in the morning.
Stock markets across the Middle East collapsed today
Panicked traders scrambled desperately to sell off their stakes in Iran’s regional rivals including Saudi Arabia and the United Arab Emirates, whose economies are hugely dependent on the price of crude oil.
The frenzied sell-off was accelerated even further by swirling rumours that Iran could ramp up its production of brent crude oil in light of the previously crushing sanctions being lifted.
Iran’s stock market was the only one to benefit from last night’s announcement, gaining one per cent as optimism grows over the rogue state’s economy.
But Saudi Arabia's Tadawul All Share Index collapsed by seven per cent to 5,409.35, its lowest level in almost five years.
The prospect of more Iranian oil hitting the market has also now become a reality
Mohammed Ali Yasin
The UAE also suffered heavily, with Dubai's DFM General Index slumping by 4.8 per cent to 2,682.56.
Mohammed Ali Yasin, managing director at NBAD Securities, told the Wall Street Journal: “Tumbling US stocks on Friday and oil prices plumbing multiyear lows ensured the Gulf markets’ sell-off.
“The prospect of more Iranian oil hitting the market has also now become a reality, weighing on already weak sentiment.”
He added concerns about the economic slowdown in China, the world’s second biggest consumer of oil, had also added to the regional gloom hovering over Middle Eastern countries.
Saudi Arabia’s stock market, which is the region’s biggest, has tumbled an astonishing 20% this month alone as it struggles to readjust its economy to cope with oil prices in free-fall.
Mr Obama said Iran will not be able to develop a nuclear weapon
Iran could overload international oil markets after sanctions were lifted
Crude oil has shed more than 75 per cent of its value since last summer and now sells for less than $30 a barrel on the international markets, down from a high of 140 per cent at the height of the world financial crisis in 2010.
Bassel Khatoun, CIO for MENA equity at Franklin Templeton Investments Ltd said: “There are obvious challenges to the 2016 regional outlook. Most notable are lower oil prices and heightened political conflict.
“We think that the region remains well positioned to deal with lower oil prices given their substantial foreign-exchange reserves and their low levels of debt."
He added “valuations have become compelling relative to other emerging markets and compared to the region’s own historical valuation range”.
Barack Obama announced the lifting of worldwide sanctions on Iran last night which were put in place in 2006, following a historic report from the UN nuclear watchdog.
It showed Iran has met its obligations under an international nuclear deal.
Speaking at a press conference today, Mr Obama said: “For decades our differences with Iran meant that our Governments almost never spoke to each other. Ultimately that did not advance America’s interests.
“Iran will not get its hands on a nuclear bomb. The region, the United States and the world will be more secure.”
Relations between Washington and Tehran have thawed in recent months, with the US even publicly thanking Iranian authorities for releasing 10 of its sailors they arrested for straying into the Persian Gulf last week.
However today America did impose fresh sanctions on some Iranian companies and individuals, just hours after lifting its sanctions against the country’s governments, over a recent ballistic missile test.
The new sanctions prevent 11 entities and individuals linked to the missile programme from using the US banking system.