From the very first days of his presidential campaign, it was clear that Donald Trump viewed Iran as an unequivocal threat to US interests in the Middle East. The president wasted no time in implementing his vision once elected, first threatening then following through on tearing up the Iran nuclear deal and doubling down on support for Iran’s arch-rival in Saudi Arabia.

Recent events imply new peaks in bilateral hostilities, namely the cancellation of oil import waivers for Iran’s remaining buyers and the dispatch of an aircraft carrier to the region to, in the words of national security advisor John Bolton, “send a clear message to the Iranian regime.”

Impact

Two decisions have recently been taken by the Trump administration to tighten the screws on Iran.

First is its refusal to renew waivers for purchasers of Iranian oil, subjecting them to the threat of sanctions should they continue their imports. This of course does not impact the economy of the United States directly as the country has long given up on purchasing oil from the Islamic Republic. However, it could be highly consequential for global energy prices, buyers of Iranian oil (some of which are close US allies), and most importantly: the economy of Iran.

Iranian supply has been disappearing from global markets ever since the Trump administration pulled out of the nuclear deal last year, falling from 2.5 million bpd to one million in April, and now to 700,000 bpd in May. Price disruptions have thus far been minimal due to Saudi Arabia’s willingness to ramp up its own production to make up for lost supply. However, Iran isn’t the only supply disruption on global markets. Venezuela and African exporters like Libya and Nigeria have also had trouble making deliveries. So far, the big winner has been Saudi Arabia by way of increased market share and, as oil exports become a seller’s market, pricing as well. The Kingdom has hiked prices for buyers in Asia and Northwest Europe just as they’re scrambling to find new sources of supply.