- The Washington Times - Monday, April 6, 2015

The Obama administration admits that a lot of questions remain over whether last week’s nuclear breakthrough with Iran will produce a final deal, and for now, the markets appear to be hedging their bets as well.

The Tehran Stock Exchange index rose 3.5 percent Sunday, following a 3 percent jump on Saturday. The TSE’s jump was the highest Iran has seen in two months. But the increase, generally seen as tepid in today’s market, is illustrative of investors’ low expectations for a wholesale Iranian economic boom in the near-term, analysts say.

“U.S. companies really have to temper their expectations and wait for further developments,” said Douglas Jacobson, an international trade law expert. “I predict that it will be at least another 12 months or longer until we see any sanctions relief.”

The Iranian currency, the rial, also rallied over the weekend in the wake of the nuclear accord, climbing about 3 percent in market trade to 32,350 against the U.S. dollar, which is within the range of the last several months, according to Iranian currency trading websites.

The agreement between Iran, the US and its international partners is set to be signed by June 30, and could release the economic sanctions on Iran as soon as next year, although the timing of the sanctions relief remains a major point of contention between Washington and Tehran.

The easing of U.S. sanctions could potentially attract tens of billions of dollars to the Iranian economy. Through decades of sanctions, Iran’s economy has struggled, and thousands of establishments have been put out of business.

Annual inflation in Iran was 15.6 percent in throughout the month of March, down from rates of over 40 percent at the height of Iran’s economic downturn in 2013, the central bank said on Friday.

“Precautionary talks have already started between Iran and some big Western investors” in areas such as oil and autos, said Mehrdad Emadi, an economist at the London-based Betamatrix consultancy. Mr. Emadi added that the talks are likely to stimulate momentum going forward.

He went on to predict that Iran’s nearly $500 billion economy would rise to over 5 percent in the year directly following the June 30 nuclear deal. It could, then, Mr. Emadi said, continue to heat up and accelerate further to 7 or 8 percent over the course of the next two years.

Iran’s trade with the European Union, which totaled $8.3 billion last year, could soar by 400 percent by mid-2018, Mr. Emadi said.

As the news of the forthcoming agreement hit the international markets, companies throughout the Middle East saw their stocks rise.

Shares in Kuwaiti logistics firm Agility, which provides freight forwarding and transportation to companies, gained 1.3 percent, while the Kuwait market index overall saw a bounce of 0.5 percent.

“When the international situation is resolved and restrictions are lifted, we’ll be among the first ones in there,” Agility’s chief executive Sultan Tarek told Reuters late last year.

Turkey also saw a bump in its economy after news of the agreement hit the wires. Consumer prices jumped 1.19 percent month-on-month, the Turkish Statistics Institute said, well above the 0.89 percent increase forecast in a Reuters poll

Turkish Finance Minister Mehmet Simsek said last week he expected a clear boost in Turkey’s exports to Iran when the sanctions are eased.

The sanctions remain in place for now, and it’s not clear whether measures targeting Iran for its human rights violations and support for terrorism would be affected by the nuclear agreement.

The biggest question mark surrounds Iran’s potential to impact the world’s oil markets, at a time when supplies are already bulging and the price of a barrel of oil has gone from over $100 to around $50 in the space of barely more than a year. Oil exports, accounting for 85 percent of Iran’s revenue.

“If the sanctions were lifted today it would have a major impact,” Phil Flynn, senior energy analyst for the Price Futures Group, said in an analysis released Monday. “They have miles of tankers filled with oil. It would be like a fire sale into a global market already oversupplied with oil.”

However, it does not look like Iran’s 30 million barrels of oil will hit the market anytime soon, Mr. Flynn said. Iran has to revamp some of its antiquated equipment and prove to U.S. inspectors that it is complying to whatever agreement is reached this summer.

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