The JCPOA was a landmark agreement signed in 2015. In it, Iran agreed to significantly curb its nuclear program, including scaling back its uranium enrichment activities. In exchange, the E3, Russia, China, and the United States provided sanctions relief, offering Iran access to the global financial system and easing restrictions that had crippled its economy.
However, after the U.S. withdrew from the deal in 2018 under the Trump administration and reimposed its own sanctions, Iran began to gradually breach the deal's terms. Most recently, Iran has been enriching uranium up to 60%, a level far exceeding the 3.67% cap set by the JCPOA.
The snapback mechanism, once triggered, allows for a 30-day window for negotiations. But with just two days remaining, Iran shows no signs of backing down.
The country’s leadership has taken a hardline stance. Supreme Leader Ayatollah Khamenei has ruled out any direct talks with the U.S., citing a lack of trust. He has also accused the E3 of acting as a pawn for the U.S., adding to the mounting pressure on Iran.
This has put Iran's foreign minister, Abbas Araghchi, in a precarious position. He is caught between hardliners who want him out and are threatening impeachment, and moderates who question his ability to handle the country's foreign policy.
If the snapback mechanism is fully implemented, the consequences for Iran's already struggling economy will be severe. The country's banks would lose access to the international financial system, and existing sanctions would be tightened while new ones would be imposed, potentially targeting key individuals.
Iran's economy is already in a state of crisis, plagued by high inflation, a hybrid war allegedly waged by the U.S. and Israel, acute water shortages, and daily power cuts. The public's patience is wearing thin, and the regime's room to maneuver is shrinking rapidly.
With the deadline looming, the world is watching to see if Iran will take a last-minute step to de-escalate the situation or if it will face a new wave of international isolation.
As for the oil price, although traders may cash in on the psychological impact of the Snapback sanctions and market volatility, the real impact will not be catastrophic to the energy markets; there will be some effect in the short term, though. In the long run, the impact will be more complex, something that can never be represented by charts and existing data.
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Despite this, some analysts believe Iran will still find ways to sell its oil. The country has already been using a network of opaque trading entities and a "shadow fleet" of tankers to sell discounted crude, largely to China. While the snapback mechanism will make this trade more complicated, it likely won't halt it completely.
The prospect of reduced Iranian oil on the market raises the question of a supply squeeze. Iran has, in the past, threatened to close the Strait of Hormuz, a narrow but vital waterway in the Persian Gulf through which over 20% of the world's oil supply flows. Any disruption here, such as targeting oil tankers, would immediately drive up insurance premiums and send global oil prices soaring.
However, the world's oil markets are better prepared to handle such shocks than ever before. The United States, now the world's largest oil producer, along with the OPEC+ alliance, has the capacity to increase output to compensate for any drop in Iranian supply. This ability to adjust and fill a potential gap in the market makes a catastrophic supply shock less likely.
In short, while Snapback sanctions will undoubtedly hurt Iran's economy, any impact on global oil prices is likely to be manageable, at least in the short term.
