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Last week, Saudi Arabia warned that it will develop its own nuclear weapons if Iran does the same. This may create turmoil in the region which may have a negative impact on the oil prices and create uncertainty among investors.
Another significant development that needs to be taken into consideration is the appointment of John Bolton as the US national security advisor. According to CNBC, John Bolton has a hawkish perspective on Iran which has raised concerns among investors that the US might face new turbulence with regards to the oil prices.
Political instability may leverage turbulence in oil prices. Saudi Arabia and Iran are two major oil suppliers worldwide. Therefore, their political and economic actions may determine the future of oil prices. There is an emerging tension between the two countries. The newly appointed US national security advisor will not contribute to smooth the tension due to his political views. Specifically, CNBC reported that “He will be responsible for advising Trump on a wide spectrum of national security issues, from the U.S.-led coalition against the Islamic State to China's aggressive actions in the South China Sea to North Korea's growing nuclear threat.”
Ian Bremmer, founder and president of Eurasia Group, one of the most popular political risk consultancy company said “less ‘jaw-jaw’ and more ‘war-war’”, meaning that Bolton is likely to embrace the “military” approach than the political.
Meanwhile, the trade tensions between the USA and China are likely to rise within the next week, due to Trump’s tariffs on Chinese imports. Beijing responded to the US tariffs by imposing higher duties on the U.S. goods, in a more aggressive manner. It should be mentioned that the Chinese tariffs include recycled aluminium and steel pipes. A potential outcome of these tensions could be that steel would hit the oil industry, as industry needs the metal to build pipelines and other infrastructures.
About the Author:
Marios Athinodorou is TeleTrade’s market analyst and commentator. Apart from being an experienced trader, Marios is an advanced technical analyst and is interested in trading psychology. He has 7 years of trading expertise in Forex and CFDs, providing insights to share with all kinds of traders, from beginners to experts. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars, here.
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