Cheap oil and costly food spell trouble for Iran

Falling oil pricesThe timing of the Iran nuclear deal is bad for the country because it coincides with low oil prices and high food prices, according to new analysis.

The data is sobering for investors hoping to see Iran’s economy and stock exchange boom as sanctions relief allows the country to return to capital markets.

“The timing is terrible because oil has continued to be supplied in excess… since July 2014,” says Jodie Gunzberg, global head of commodities, S&P Dow Jones Indices.

Low oil prices will lead to low oil revenues, which may even fall further because the re-entry of Iranian oil on the global market will increase supply.

“A consequence of Iran’s lower potential revenue is that it may hinder its ability to import healthy food to feed its population,” says Gunzberg. “Since its climate is not ideal for production, and is warming, Iran is food insecure and needs to rely heavily on imports.”

Negotiators reached a deal in Vienna last week in which Iran agreed to limit its nuclear programme in return for the easing of sanctions.

©2015 funds global mena

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