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Topics: News, US News, World News, Donald Trump, Iran, Money
Kit Roberts
Topics: News, US News, World News, Donald Trump, Iran, Money
Donald Trump has done a U-turn and temporarily removed sanctions on Iranian oil after prices skyrocketed due to the US and Israeli war with Iran.
Prior to the war oil prices had been around $70 a barrel, but have now shot up to around $110 a barrel.
The increase came after Iran responded to US and Israeli attacks by blocking the strategic Strait of Hormuz, a stretch of water located between the UAE and Iran's south coast through which around 20 percent of global oil traffic passes.
Ships carrying Iranian oil have been allowed to pass through the Strait, with China being the biggest buyer of Iranian oil.
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However, due to US sanctions around 140 million barrels' worth of crude oil has been sitting idle, and Trump has now granted a a temporary licence for this oil to be sold in a bid to stabilize prices.
The move comes as the US midterms are fast approaching, and high oil prices can be a problem for an incumbent president, increasing the pressure on Trump and his administration to bring prices down while continuing the war.
Treasury Secretary Scott Bessent said: “Iran will have difficulty accessing any revenue generated and the United States will continue to maintain maximum pressure on Iran and its ability to access the international financial system."
The US Energy Information Administration has said that 140 million barrels' worth is sufficient to meet global demand for oil for approximately 36 hours.
It may create a difficult scenario for the US, as if Iran can access the finances from selling the oil then it can use this to finance war with the US and Israel.
However, while the Strait of Hormuz was blocked to most traffic Iran was still allowing its own vessels to pass through, meaning it was still selling its oil to China.
The surge in oil prices has already had a knock on effect on the US economy, with gas prices rising and mortgage rates also climbing to 6.22 percent amid fears of market panic over oil prices.
Trump's war with Iran is now entering its third week, with the US and Israel hitting multiple Iranian cities and infrastructure.
And oil is not the only natural resource which has become unstable due to the war.
Reports have emerged about attacks on desalination facilities in Iran and Bahrain, which could impact the supply of water in the Arabian Gulf, where desalination accounts for a large proportion of drinking water.