The appointments of Pompeo and Bolton have made a lenient stance on the Iran regime inconceivable.
Instead, they support Trump in delivering on his promise to withdraw from the Iran nuclear deal and reinstate extended economic sanctions. It is doubtful if the U.S. manage to convince anyone but Israel to join in on its retaliatory measures against Iran.
Nevertheless, it seems like Trump is determined to also sanction any non-U.S. entity that continues to deal with Iran after the 180-day waiver. In addition, the conflict between Israel and Iran is already on an escalating and dangerous path. Depending on Iran resuming its nuclear program, a military escalation including pre-emptive strikes is again a possibility. Ordered by probability, the below table shows the expected impact on Iran crude oil production in the four main scenarios:
|Scenario||Expected loss of Iran crude oil production and exports||Comment|
|U.S. sanctions||0.3-0.8 mbd||Loss depending on level and efficiency of U.S. sanctions|
|U.S. + EU sanctions||0.5-1.0 mbd||Similar to production gain after the deal|
|Military conflict escalation||> 0.8 mbd||
A possible outcome if economic sanctions does not prevent Iran from resuming its nuclear program
Level of production loss above 0.8 mbd directly linked to level of escalation
|Re-negotiated deal||o mbd||Difficult to bring Iran back to the negotiation table after U.S. withdrawal from the deal|
|Source: Vontobel Asset Management, Full transcript of Trump speech: https://www.nytimes.com/2018/05/08/us/politics/trump-speech-iran-deal.html|
Jon Andersson - Head of Commodities - Vontobel