Oil Price: the failure to reviving the JCPOA and its direct impact on crude oil markets

Talks on JCPOA vienna

The price of crude oil fell again on Monday in the markets, perhaps over the fears of yet another potential conflict in the Middle East, involving Iran, the West, the Sunni Arabian powers in the region and of course, Israel.

Although the signatories to the JCPOA, 2015 Iranian nuclear deal, are meeting in Vienna in the hope of reviving the deal that has been in permanent limbo, there are increasing signs that Iran and the West are just drifting apart in a whirlpool of mutual distrust.

One of the many stumbling blocks, among many, appears to be Iran’s insistence on removing sanctions first and giving a guarantee that the next US administration will not tear the agreement up as President Trump did while in office.

While making matters worse, the Iranian foreign minister said today that sanctions and the success of the talks are mutually exclusive.

The West, on its part, views Iranian position as a calculated attempt to buy time until they take a leap in its nuclear programme – developing the bomb or coming very much closer to it.

The West collectively appears to have sensed that the talks were not going anywhere in the current circumstances, as the foreign ministers voiced their frustration: the Foreign Secretary of the UK says this will be the only chance for Iran to negotiate a deal; the German foreign minister expressed the same sentiment; the US, meanwhile, is also hinting that the narrow alley of the negotiations has a dead end, in the current stalemate, indeed.

In these circumstances, there are heightened activities of diplomacy in the Middle East: the UAE and Iran have started talking again directly; Israeli prime minister is meeting the Crown Prince of the UAE in Abu Dhabi, first time in history at present; the two countries could easily be sucked into a potential conflict in the event of a potential military confrontation; Sunni Arab nations in the region, with significant Shia population, do not want Shia Iran to acquire nuclear weapons.

Unless Iran makes a seismic shift from its current position, both the talks and the revival of the JCPOA will fail, compelling the US to go for what President Biden calls, ‘the other options’.

If the other options include a direct military involvement, the flow of oil through strategically important Straight of Hormuz will be the first inevitable casualty; Iran has been increasing its fleet of speed boats for a few weeks, perhaps in anticipation of some military manoeuvres by the West – and Israel; Iranian generals, meanwhile, have been waring its adversaries, promising a ‘crushing blow’.

As the signatories to the JCPOA are starting into the abyss of yet another failure, a military response to the Iranian nuclear programme will not be in the hypothetical realm indefinitely.  

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