Trump Challenges Iran With Sanctions
Did Trump’s aggressive stance towards Iran led the country to a second test of their ballistic missiles? President Trump has consistently spoken out against the nuclear arms agreement bartered by President Obama last year. On Friday, the Trump administration enacted sanctions in response to Tehran’s initial military display earlier this week. However, Iranian President Hassan Rouhani used this as an excuse to conduct another rocket exercise during a previously scheduled military operation. Critics worry that the President’s confrontational style might drive Iran to dive further into the fight against Islamic State in Syria and Iraq, introducing an additional layer of instability into an already volatile situation.
Trump Speaks Out against Iranian Missile Testing
Trump first voiced opposition to the latest developments in the current Iranian military program after a missile launch on January 29th, which arguably broke a U.N. resolution which was added as a corollary to the existing arms treaty. In the resolution, which was placed in effect in July of 2015, Iran was barred from launching ballistic rockets for a period of eight years. The present administration declared that this violation triggered economic restrictions on a number of businesses that worked closely with Tehran to conduct the test. Ironically, despite strong criticisms of the nuclear deal signed with Iran, none of the sanctions seem to reverse the terms of this agreement.
Obama’s Iran Treaty Created New Opportunities
Some industry analysts worry about the impact of sanctions on a deal signed in December between Boeing and Iran Air. Per the agreement, Boeing will provide Iran Air with 80 planes valued at more than $16 billion, although Iran will only pay $8 billion of this cost. This is the first time that a U.S. company has made a deal of this size since the 1979 revolution which ended Iran’s previously close relationship with America.
Boeing’s Middle East Stakes
Boeing needs to compete in the Middle East if it has any chance of outperforming rival Airbus. Airbus already had a contract for 118 planes with Iran Air. In the face of economic pressure, the Iranian government could decide to cancel the deal. This could cut off jobs for up to 100,000 Boeing employees. This shows how tariffs and trade contracts threaten American companies as much as Chinese and Mexican ones.
Iran Continues to Support Terrorism
Trump angered Iran by including it on a list of countries blocked from visas to enter America. Iran has been one of the few countries to openly fight against Islamic State. But it is also supports other terrorist groups such as Hezbollah in Lebanon. Secretary of Defense James Mattis declared Iran to be “the single biggest state sponsor of terrorism in the world.”
How Do the Iranian Missile Tests Affect Trading?
There are two ways in which Iran’s actions could impact trading. The first is directly on the economy by way of contract cancellations on Boeing. This could lead the company to see reduced share values. Additionally, as several major U.S. companies also supply parts to produce the planes being sold to Iran, the DOW and S&P 500 could also fall if the sale is revoked. Because American parts are essential to producing aircraft, Trump’s sanctions against Tehran could delay the Airbus sale. Planes made with American parts require special permission if headed for Iran. This could lead to a lower London FTSE.
The missile testing also affects how the world views the situation in terms of global stability. Investors aren’t sure how far Trump will go against the nuclear arms treaty. No one knows whether the U.S. or Iran will blink first if missile testing continues, as threatened by President Rouhani. Gold will continue its climb, and the dollar could drop as traders consider the potential fallout of an ongoing standoff. Iran has OPEC permission to sell oil at a higher level than most other countries. If Iran refuses to direct crude to the United States, oil prices could rise at a faster rate than anticipated.