Oil jumps, Asian shares mixed after US leaves Iran deal
SEOUL, Korea, Republic Of — Oil prices surged while Asian stock markets traded mixed on Wednesday after President Donald Trump announced the United States will withdraw from a 2015 nuclear accord with Iran and re-impose sanctions.
KEEPING SCORE: Japan’s Nikkei 225 dropped 0.4 per cent to 22,408.88 and South Korea’s Kospi retreated 0.2 per cent to 2,443.98. Hong Kong’s Hang Seng index added 0.1 per cent to 30,445.07 while the Shanghai Composite Index dipped 0.1 per cent to 3,159.15. Australia’s S&P/ASX 200 added 0.3 per cent to 6,108.00. Stocks rose in Taiwan, Singapore and Indonesia but fell in Thailand and the Philippines.
IRAN DEAL: The U.S. decision to leave the Iran nuclear deal, which required Iran to curb its nuclear enrichment program in exchange for relief from international sanctions, will be followed by a restoration of harsh sanctions aimed at limiting Iran’s ability to sell oil or conduct other overseas business. Now Iran, the world’s fifth-largest oil producer, will have to decide whether to follow the U.S. and withdraw or try to salvage what’s left with the European countries. Should supply constraints push oil prices higher, Asia would see a mixed impact. Costs would rise for countries that rely heavily on imports, such as Japan, while exporters like Indonesia would see revenues rise.
ANALYST’S TAKE: “Geopolitical risks are heightened especially if Iran retaliates, but it could wait and see if the deal is completely undone or if there is scope for it to continue without the U.S.,” Mizuho Bank said in a daily commentary. With Germany, France and Britain saying they are committed to the accord, the European countries will “continue importing oil from Iran, albeit having to side-step the U.S. banking system for trade purposes,” it said.
OIL: Prices of oil fell sharply before Trump’s announcement but rebounded, with benchmark U.S. crude oil jumping $1.90, or 2.7 per cent, to $70.96 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.67, or 2.4 per cent, to $69.06 per barrel on Tuesday. Brent crude, which is used to price international oils, gained $2.12, or 2.8 per cent, to $76.97 per barrel in London. It lost $1.32, or 1.7 per cent, to close at $74.85 per barrel on Tuesday.
WALL STREET: Amid uncertainty over Iran, U.S. stocks finished flat on Tuesday. The S&P 500 index dipped 0.03 per cent to 2,671.92. The Dow Jones industrial average gained 0.01 per cent to 24,360.21. The Nasdaq was flat at 7,266.90.
CURRENCIES: The dollar rose to 109.73 yen from 109.13 yen while the euro fell to $1.1832 from $1.1864.