Oil prices jumped to near six-month highs on Monday as the Trump administration cracked down on Iranian oil exports, announcing it would no longer grant waivers from U.S. sanctions.
The announcement came on an otherwise quiet day for global stock markets, with European bourses on holiday and Wall Street trading sideways ahead of major earnings releases later in the week.
The White House announced it was calling an end to six-month waivers that had exempted countries from unilateral U.S. sanctions on Iranian oil exports. Starting in May, these countries—China, India, Turkey, Japan, South Korea, Taiwan, Italy and Greece—would face sanctions if they continue to buy the oil.
“The Trump administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime’s destabilizing activity threatening the United States, our partners and allies and security in the Middle East,” the White House said in announcing its move.
Oil prices jumped on the news, with the U.S. benchmark West Texas Intermediate ending at $65.70, up 2.7 percent. “The market is afraid of oil scarcity,” Daniel Ghali of TD Securities told AFP. “The market is trying to assess how much crude oil will be impacted,” he said, adding that he thinks China will continue to buy from Iran.
Higher oil prices gave a lift to U.S. petroleum companies, including Dow members Exxon Mobil and Chevron, which won 2.2 percent and 1.7 percent respectively.
Petroleum-linked shares were among the winners on an otherwise quiet open to a Wall Street trading week heavy with earnings release.
Analysts see the coming four days as the most critical period for first-quarter earnings. The list of companies reporting includes Amazon, Boeing, Facebook, Procter & Gamble and Exxon Mobil. The S&P 500 is projected to see a 3.9 percent decline in first-quarter earnings per share, according to FactSet. If that happens, it would be the first year-over-year decline since the second quarter of 2016.
Analysts have been broadly upbeat about earnings thus far, with most companies besting lowered expectations.
Earlier, Chinese stocks closed lower on speculation authorities would limit monetary policy easing after signs of stabilization in Asia’s top economy.
The weakness came after the Politburo, China’s top decision-making body, said on Friday the government would continue to implement a proactive fiscal policy and a prudent monetary policy that is neither too tight nor too loose.
Investors had interpreted that as meaning “that the government will suspend the easing of monetary policy,” said Shen Zhengyang, an analyst at Northeast Securities. “Large caps like financials and the real estate sectors suffered big losses today accordingly,” he added.
Japanese stocks went the other way—opening lower but closing marginally higher although volumes were thin ahead of an unprecedented 10-day market closure in Japan to celebrate the enthronement of a new emperor on May 1.
Traders may also be holding fire as they await a two-day meeting of the Bank of Japan later in the week. Some companies, including gaming giant Nintendo, are also unveiling their latest results.