Was that the end of the rebound?

Two unrelated items in the news could mark the end of the euphoria over global growth, and in particular European growth, after the 2008 crisis.

First: The oil price has been driven to its highest level in three and a half years after Donald Trump ignored the pleas of European allies and pulled America out of the Iran nuclear deal.

Brent crude - sourced from the North Sea - was swept up to $76.85 yesterday morning, as traders digest the prospect of a new crisis in the Gulf.

The oil price jumped following Trump’s decision to impose “the highest level of economic sanctions” on Iran, and to reimpose sanctions on any foreign company that continues to do business with it.

Lukman Otunuga, research analyst at FXTM, said: “While it was widely anticipated that Trump would pull out of the Iran agreement, what is likely to leave a lasting impact on the markets is the threat that he would also penalize those who help Iran.

“These overall risks are encouraging traders to price in some new geopolitical risk premium, and his threat can potentially be seen as a blow for US allies. There is a threat of Trump’s stark tone questioning US relations with its European allies, especially given that the likes of France and the United Kingdom had appealed for Trump not to withdraw.”

As Quarz explained; “Energy giants like Total and Royal Dutch Shell have lucrative agreements to work with Iran, while Renault has a joint venture to make 150,000 cars a year, and FrancoGerman plane maker Airbus has reportedly delivered just three out of 100 jets promised to Iran, in a deal worth billions....

“Any European companies with a US arm that agreed a deal with Iran would now be violating US law, says Adam Smith, a lawyer at Gibson Dunn who is a former Treasury sanctions official.

“Those not active in the US could be hit with a “with-us oragainst-us sanction,” in which Washington would tell the company that if it wants to keep trading with Iran they can’t trade with America, Smith said.”

The second item relates to interest rates. As we all know, these have been at historic lows for many years now. It would seem they are about to rise, although at different speeds. The US has already began raising its rates and the UK could be doing so in the coming months while Europe still has to await the end of the ECB buying of government stocks which it has been doing these past years and only when this is over, the ever-cautious ECB might be pushed to raise interest rates.

These two items, we said, are unrelated. Together they bring this part of the world back to the situation it was in pre-2008. The honeymoon is over. Though far too early to see, we could be in for a new phase of recession.

In the intervening years, Europe has managed to ride the wave and it did introduce some measures to overcome the crisis. But it has not completed the work and the items of heavy lifting that are needed are not in place yet as the main European governments disagree on what needs to be done.

This has always been the European lesson: it is only a crisis which gets the European leaders moving.