Oil markets in 2025 could face turbulence if President-elect Donald Trump reintroduces strict policies toward Iran.
According to JPMorgan analyst Arun Jayaram, while non-OPEC supply growth is expected to stabilize prices, the geopolitical wildcard of renewed sanctions on Iran could send shockwaves through the market.
Investors in the United States Oil Fund LP (NYSE:USO), the ProShares Ultra Bloomberg Crude Oil (NYSE:UCO) and the Invesco DB Oil Fund (NYSE:DBO) may want to closely monitor their holdings.
Trump's Maximum Pressure: A Familiar Script?
During Trump's first presidency, his "maximum pressure" campaign drastically curtailed Iranian oil exports, cutting them to just 400,000 barrels per day. In contrast, under the Joe Biden administration, Iran's oil exports rebounded dramatically, surging to 1.6 million barrels per day by 2024.
Jayaram suggests that Trump's potential return to sanctions could disrupt up to 1 million barrels per day of Iranian crude—an outcome that could unsettle the fragile equilibrium.
Can OPEC+ Play Along?
Jayaram's analysis highlights a significant challenge for Trump's sanctions strategy this time: OPEC+. Previously, the oil cartel adjusted production to mitigate the impact of lost Iranian barrels.
However, with shifting alliances and evolving market dynamics, securing similar cooperation may prove far more difficult for Trump 2.0. Without OPEC+ backing, the effectiveness of sanctions in stabilizing prices could be severely limited.
What's Next For Oil Markets?
With non-OPEC supply projected to grow, the baseline for oil prices appears steady. Yet, the prospect of geopolitical brinkmanship introduces uncertainty.
Jayaram emphasizes that the outcome hinges on Trump's ability to navigate international diplomacy and OPEC+ politics, both of which could determine whether oil markets face disruption or find balance.
The stage is set for a complex and unpredictable 2025, where Trump's Iran policies and shifting market dynamics could redefine the balance of power in oil markets. Investors should remain attentive to how these forces unfold."
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