Iran’s oil comeback, already taking longer than many traders expected, will be further complicated by shipping attacks in the past week, including a deadly drone strike on a tanker near the Gulf of Oman that the U.S., U.K. and Israel all blamed on Tehran.
With talks held up by a change of presidency in Tehran, the incidents add friction to a process that could return 1 million barrels of oil a day to the global market within months. Even if the allies decide against a military response, Washington may be less willing to ease sanctions on the Islamic Republic’s energy exports.
Read: Iran’s Raisi Starts Presidency as New Crisis Grips Persian Gulf
The negotiations — to revive a 2015 pact that limited Iran’s atomic program in return for sanctions relief — had already stalled. A sixth round in Vienna broke up last month. Diplomats are waiting for Iran to re-enter talks now that Ebrahim Raisi, an austere cleric who has long argued against a rapprochement with the U.S., has become president.
Restoring the Joint Comprehensive Plan of Action — which then-President Donald Trump pulled the U.S. out of in 2018 — is key to Iran’s ability to increase oil production. Its crude exports have plummeted to almost nothing from more than 2 million barrels a day in mid-2018.
Many oil investors had expected a new nuclear deal before Iran’s elections in mid-June.
While Raisi and Supreme Leader Ayatollah Ali Khamenei could resume negotiations soon, there’s still much for the sides to overcome. Iran wants a guarantee that future U.S. administrations won’t withdraw from any deal, as Trump did. It also insists sanctions are removed across the board — on its shipping and banking industries as well as on energy exports.
Washington is wary of both demands. Another sticking point is the JCPOA’s so-called “break out” clause. It was designed to constrain Iran’s nuclear activities enough that it would need a full year to build a bomb if it chose to exit the accord. Some U.S. officials believe Iranian scientists have made enough progress in the past three years to construct an atomic weapon within a few months.