Pres. Trump: MOU is not final, if I don't like agreement we will go back to dropping bombs

President Trump stated the Iran MOU is not final and threatened to resume bombing if negotiations fail. This reintroduces military risk, potentially reversing the recent removal of the war premium from oil markets and threatening the fragile stability that had supported risk assets.

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Pres. Trump: MOU is not final, if I don't like agreement we will go back to dropping bombs

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Megan Costello states the war premium came out of oil markets immediately with the MOU, but Trump's threat to resume bombing could reintroduce that premium, making oil prices volatile in the near term.

European leaders and others want the Strait reopened, which is why oil prices have been watched closely.

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Megan Costello

Trump's comments severely undercut the stability his administration had been trying to generate with the Iran deal, and markets that celebrated the deal as ending the war are now shown to be premature.

The president does not want to remove the military as a negotiating leverage point, but this reintroduces uncertainty that had been removed from markets like oil.
Megan Costello

The war premium came out of oil markets immediately when the MOU was announced, but Trump's threat to resume bombing could put that premium back in.

WTI is still below $77/barrel reflecting the immediate stability from the deal, but the president's comments will catch attention and could affect markets going forward.

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