Early this month, the sanctions that had been placed on Iran officially went into effect. The Trump administration intends to keep these sanctions on Iran until a brand new agreement regarding Iran and its nuclear activities is made. These sanctions are targeted at Iran’s oil exports and any financial institutions that try to conduct business with Iran. President Trump feels that the sanctions will limit Iran’s influence in the Middle East and hopefully force the Iranian government to come to a new agreement that is in America’s best interest. President Trump is confident that the United States can apply this economic pressure on Iran without driving oil prices too high. The sanctions only just began and it will be several months at least before any effects of the sanctions are felt. While the Trump administration believes they can apply these sanctions without disrupting the oil market, there is a possibility that this will lead to a spike in oil prices and wreak havoc on the pocketbook of the American consumer. Matt Badiali is a geologist and financial advisor who has been warning individuals that these sanctions on Iran will most likely lead to higher oil prices in the long-term.
There were some individuals who felt there would be an immediate move in the oil market after the sanctions took effect, but this did not happen. Matt Badiali feels that the oil market remained calm because there are eight countries who were given a waiver to continue buying Iranian oil for another six months. The sanctions may have no impact until the six month period ends. Saudi Arabia and the United States increased oil production before the sanctions went into effect, which flooded the oil market with more oil. Matt Badiali pointed out that Venezuela is an economic mess and is producing much less oil than it did a year ago. He is predicting that Venezuela’s oil production will continue to decline in the months ahead. He also points out that Iran’s oil exports should drop by 900,000 when the eight counties with waivers can no longer purchase Iranian oil. With demand for oil on the rise, the Iran sanctions, and Venezuela producing much less oil, Matt Badiali is predicting higher prices in the oil market.
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