As a European oil embargo on Iran comes to an end the country is beginning efforts to boost exports by 500,000 barrels of oil a day, now that international sanctions have been lifted. Analysts anticipate that the OPEC member will add 1 million barrels per day to its existing output by the year-end.
Why were sanctions lifted?
Economic sanctions ended following the news that the UN certified Iran's compliance with its 2015 treaty, as well as the US removing its own sanctions. President Hassan Rouhani was quoted saying the development was a great victory, proclaiming Iran is now welcoming business with international economies.
How will this affect you?
The Energy Information Administration (EIA) reported that Iran holds almost 10% of the world's crude oil reserves and 13% of OPEC reserves. In the Middle East a race between Saudi Arabia and Iran has started with both countries being involved in a battle for oil market share. While it may still be too early to say, worries about Iran's entry into an already packed oil market could potentially keep prices dropping towards USD 20.
Political risk and uncertainty can have a dramatic effect on global currency markets and therefore you should ensure you have adequate equity to cover your positions.