The U.S. and Iran saga has had a grip over oil markets for the last three months. Oil prices spiked in May when Trump announced that he was imposing sanctions on Iran and leaving the Joint Comprehensive Plan of Action (JCPOA). Now, as the first round of sanctions goes into effect, the relationship between Iran and the U.S. has become increasingly strained. The second round of sanctions, which is going to focus on the energy sector, will have a much higher impact than the current round. According to different estimates, sanctions could take anywhere from 1.5 to 1 million barrels out of the market. This combined with the recent worries about spare capacity and the ongoing tension in the Arabian Peninsula (between Yemeni Houthis and KSA) may well drive prices towards the much-hyped $90 mark.
While there is certainly a possibility of a more than one million bpd decline in Iranian oil, there are some who suggest the decline will be significantly less than that. It is important to note that India and China account for almost 50 percent of Iranian oil exports between them and likely have the ability to boost their imports.
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