The US is poised to enhance oil sanctions against Iran under the incoming Donald Trump administration, as highlighted by analysts assessing potential market impacts. Trump, the Republican nominee, triumphed over Kamala Harris, the Democratic candidate and vice president, in the recent presidential election.
During his initial term, Trump launched a campaign that significantly increased Iran's isolation while deteriorating its economy. His anticipated return to the White House could signify a resurgence of that campaign against Iran. As ING Bank pointed out in a Wednesday report, the short-term outlook for oil could be buoyed by a Trump victory, albeit with a risk of more stringent sanction enforcement directed at Iran.
However, over the medium to long term, a resurgence of Trump might be bearish for the oil market owing to the intricacies of trade and foreign policy. Throughout his campaign, Trump has laid blame on current President Joe Biden for not rigorously implementing oil-export sanctions against Iran. In the late-afternoon trading session on Wednesday, West Texas Intermediate crude oil saw a 0.3% decline, settling at $71.76 a barrel, while Brent crude fell by 0.7% to $75 a barrel. The current pressure on crude futures emanates from the likelihood of a tit-for-tat global trade conflict, which could suppress demand and exacerbate an already fragile outlook for the energy market in 2025.
Saxo Bank indicated in a Wednesday note that escalating tariffs might hinder global economic growth, subsequently dampening energy demand according to Ole Hansen, Saxo's Head of Commodity Strategy. Further compounding these issues, the geopolitical environment will warrant close scrutiny, particularly concerning US-Russia relations, the ongoing Russia-Ukraine conflict, and the dynamics in the Middle East.
A Trump administration is expected to impose tighter restrictions on Iranian oil exports. In contrast, Iranian state media contended that there’s 'no significant difference' based on who occupies the US presidency. Moreover, the recent decision by members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to postpone their supply increase by a month, alongside a weaker US dollar, is projected to lend support to oil prices.
This is further supplemented by the potential for supply disruptions in the Gulf of Mexico owing to tropical storm Rafael, ING reported on Wednesday..