Commodities Corner: Here’s why Netanyahu’s Iran allegations shook up the oil market

By

Markets/commodities reporter

Israeli Prime Minister Benjamin Netanyahu accused Iran of hiding a nuclear weapons program Monday, causing a spike in oil prices as it reinforced expectations the U.S. will pull out of an agreement that saw Tehran agree to halt its nuclear program in exchange for an easing of sanctions.

U.S. benchmark West Texas Intermediate crude CLM8, +0.51%  soared to an intraday high above $69 a barrel and sent global benchmark Brent crude LCON8, +1.07%  past $75 a barrel, though prices gains were more tempered by the settlement.

In the address that was also shown live on YouTube, with a link from Netanyahu’s official Twitter account, the prime minister presented what he said were Iran’s secret nuclear files. He referred to the nuclear deal as “terrible” and accused Iran of having a “secret nuclear bomb program.”

Iran was “brazenly lying when it said it never had a nuclear weapon program,” he said.

A screenshot from a YouTube video of Israeli Prime Minister Benjamin Netanyahu’s address, showing what he says is the goal of a secret Iranian nuclear weapons program.

Netanyahu said that Israel has known for years that Iran had a secret nuclear weapons program called Project Amad, which he said is a comprehensive program to “design, build and test nuclear weapons.”

The program had a specific goal to “design, produce and test 5 warheads, each with 10 kiloton TNT yield for integration on a missile,” he said, citing what he said was an original Iranian presentation. Netanyahu said that would be similar to “five Hiroshima bombs to be put on ballistic missiles.”

Oil prices had already found support in recent days from expectations that the U.S would pull out of the nuclear deal by a May 12 deadline, as U.S. President Donald Trump had already hinted that he was willing to walk away from the 2015 agreement between a group of world powers, including the U.S., and Iran aimed at curbing Tehran’s nuclear activities.

James Williams, energy economist at WTRG Economics, estimated that the loss of Iranian oil from sanctions would be 500,000 barrels a day—possibly less depending on participation by the European Union.

Netanyahu’s accusations raises the prospect that the U.S. will return to sanctions, but it also “indicates a higher probability that Israel will attack Iranian nuclear facilities,” he said.

Williams points out that Israel has already taken similar actions in the past, with Iraq and Syria, because of what’s known as the Begin Doctrine, a policy named for former Prime Minister Menachem Begin that holds that enemies of Israel can’t be allowed to obtain nuclear weapons.

For now, it is difficult to say whether the gains in oil prices will be sustained, he said.

“Certainly other countries could make up the difference” in terms of lost oil supplies, “but it would not be instantaneous,” said Williams. “Much of the impact is already backed into the price as the odds are better than [an] even chance there will be sanctions. I think Netanyahu increased the probability.”

Williams said it’s “still not 100%, but probably nearer 80% that Trump will not extend the [sanctions] waivers.”

That said, “if the Iranians attack Israel from within Syria, the odds go up that Israel will retaliate with an attack on Iranian assets in Iran,” he said.

Filed in: Top News Tags: 

You might like:

The Wall Street Journal: White House wants to merge federal Labor, Education departments The Wall Street Journal: White House wants to merge federal Labor, Education departments
Key Words: Will detained migrant children be reunited with parents? No one seems to know Key Words: Will detained migrant children be reunited with parents? No one seems to know
MarketWatch First Take: Micron earnings prove the doubters wrong again MarketWatch First Take: Micron earnings prove the doubters wrong again
In One Chart: The smart money is ready to pounce on distressed debt, but investors must beware the risk of ‘total wipeout’ In One Chart: The smart money is ready to pounce on distressed debt, but investors must beware the risk of ‘total wipeout’
The Wall Street Journal: Argentina, Saudi Arabia to join MSCI emerging-markets index The Wall Street Journal: Argentina, Saudi Arabia to join MSCI emerging-markets index
In One Chart: One millennial’s journey from college to $5,000 a month in disposable income In One Chart: One millennial’s journey from college to $5,000 a month in disposable income
The Wall Street Journal: Michael Cohen quits RNC post, criticizes family-separation policy The Wall Street Journal: Michael Cohen quits RNC post, criticizes family-separation policy
One reason why liberals drink more lattes One reason why liberals drink more lattes

Leave a Reply

Submit Comment
© 8296 Stock Investors News. All rights reserved. XHTML / CSS Valid.