Investors prepare for Iran volatility

Investors should expect an increase in market volatility and ensure they are diversified in the wake of the US president’s decision to pull out of the Iran nuclear deal this week.

According to Tom Elliott, international investment strategist at deVere Group, the US exit and promise to reimpose “powerful” sanctions against Iran will see “global stock market sell-offs as the world adjusts to the news” and a likely rally in the US dollar, gold and oil.

“We will need to wait for the full Iranian response,” says Elliot. “However, I expect that they will try to continue to appear the reasonable partner and work with Russia and the Europeans, playing them off against the US. If they take a more aggressive stance, oil, gold and the dollar will go considerably higher.”

The likely impact on oil prices of a unilateral return of US sanctions was also highlighted by Mitsubishi UFJ Financial Group (MUFG). “Under this scenario, we view that there are upside risks of Brent rising above $80 per barrel and [US marker] West Texas Intermediate (WTI) above $75 per barrel depending on the scale and scope of the reimposition of sanctions,” said Ehsan Khoman, head of research and strategist for Mena at MUFG.

As of May 10, Brent Oil was up 0.7% at $77.76 a barrel, while WTI rose 0.8% to $71.71, the highest points for both benchmarks since late 2014.

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