TRUMP CALL ON IRAN WILL HIT INDIA

US President Donald Trump’s decision to pull out of the nuclear deal with Iran has pushed the global crude prices higher and that affects India in more ways than one. More so, because Iran is our third biggest supplier of crude after Iraq and Saudi Arabia. The impact is already visible in the slide of the rupee, which has breached 67 to the U.S. dollar this week.

Following the US announcement, crude oil prices on Wednesday jumped to a 3year high with Brent crude being quoted at $76.75, a rise of 2.5%.

Higher global crude prices have helped lift US bond yields. This, in turn, tends to make the dollar more attractive to investors. Result: there are concerns about capital outflows in emerging markets, as the prospect of higher US interest rates attracts investors to US bonds rather than riskier assets.

India will also feel the impact of US sanctions on Iran at a time New Delhi and Tehran were looking at increasing their trade. In the last three years, for instance,

after the sanctions on Tehran were lifted by former US president Barack Obama, India’s crude oil imports from Iran have nearly doubled. The curbs will now make it harder for Iran to sell its oil to India and petrol prices, which are already at a fouryear-high, will rise further if the supply were to reduce.

Trump has also announced that he will be instituting economic sanctions at the highest level and any country that helps Iran in its quest for nuclear weapons could also be strongly sanctioned.