TOKYO, May 9: Crude oil prices jumped back to near 3 1/2-year highs on Wednesday after President Donald Trump pulled the United States out of an international nuclear deal with Iran, sparking worries about global oil supplies.
Asian shares ticked down as renewed U.S. sanctions on Tehran were seen as disruptive for many companies that have deals with Iran. Trump’s move is also seen as risking worsening already-tense relations between Iran and U.S. allies in the region.
“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.
“U.S. sanctions could affect various industries. And tensions between Iran and Israel look set to intensify. Those will begin to cap share prices,” he added.
West Texas Intermediate (WTI) crude futures traded at $70.57 per barrel, up 2.2 percent and near Monday’s peak of $70.84, the highest level since November 2014.
Brent crude futures jumped as much as 2.5 percent to a 3 1/2-year high of $76.75 in Asian trade on Wednesday.
Iran, the third-biggest producer among the Organization of the Petroleum Exporting Countries, produces about 3.8 million barrels per day (bpd), or about 4.0 percent of the world’s oil supplies.
The U.S. Treasury said it will reimpose a wide array of Iran-related sanctions after the expiry of 90- and 180-day wind-down periods, including those aimed at Iran’s oil sector and transactions with its central bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 percent while Japan’s Nikkei fell 0.4 percent.
While some investors drew comfort from the fact Iran pledged to remain in the nuclear deal despite the U.S. pullout, they are wary of escalating tensions in the Middle East.
Israel is on a high alert, mobilising reserve forces while Syrian state media accused Israel of launching missiles at a target near Damascus on Tuesday just after Trump’s announcement.
In neighbouring Lebanon, Hezbollah and its political allies had just made significant gains in a parliamentary election, boosting an Iranian-backed movement fiercely opposed to Israel and underlining Tehran’s growing regional clout.
(AGENCIES)
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