As US President Donald Trump dragged the country out of the Iran deal, share prices rattled in Asia. While mining, energy and banking sectors showed positive returns, most markets witnessed slight declines. Japan’s Nikkei 225 showed a decline of 0.44% and Kospi of South Korea went down 0.24% to 2,443.98.
“In the very short term, it looks as if the impact of heightened geopolitical worries was limited to oil markets. But that is not the end of the story,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “US sanctions could affect various industries. And tensions between Iran and Israel look set to intensify. Those will begin to cap share prices.”
Trump’s decision of exiting the Iran deal might tighten the crude oil market in the second half of 2018 and in 2019. US crude oil price surpassed exceeded US$70 mark for the first time since 2014. Brent crude prices went up 2.93% to US$77.04.
“But compliance with unilateral US sanctions would be much more difficult to enforce than the multilateral measures implemented in 2012,” said Paul Sheldon, Platts Analytics associate director. “This could test the Trump administration’s appetite for sanctioning foreign companies, and the term ‘significant’ in the sanctions legislation potentially leaves some wiggle room which could be used to avoid a trade dispute.”