Global indexes plunge
All the global markets saw a massive sell-off on Friday, January 15, 2016. This came ahead of the UN’s decision on Friday to lift sanctions on Iran. The UN said that Iran has met its commitments and has curtailed its nuclear program. It thus lifted international sanctions on Iran. The news pushed oil prices down further.
On the back of the fall in oil, major global indexes plunged on Friday. It was a huge single-day sell-off. The Dow Jones Industrial Average (DIA) fell more than 500 points that day after oil prices fell to 12-year lows. The Europe-tracking ETFs (FEZ) (EZU) fell 3.4% that day.
New oil supplies from Iran
After the easing of international sanctions on Iran, we can expect new oil supplies from Iran. Iran is ready to increase production, which will put more downward pressure on the global oil supply. Major integrated oil and gas companies such as Occidental (OXY), Exxon Mobil (XOM), Chevron (CVX), and Total (TOT) fell 1.9%, 2.0%, 2.1%, and 3%, respectively, on Friday, January 15, 2016.
Friday’s sell-off took away the one-day positive return of global markets after the rebound in crude oil prices from multiyear lows. But crude oil is still the market driver. Depending on their movements, markets are reacting according to the price of crude oil. Prices are falling continuously due to slow demand and huge supply. There’s no sign of an increase in demand because the world is planning for renewable energy sources. In this current scenario, we could see more downside for crude oil.
In the next part of this series, we’ll analyze the movement of crude oil after the Iran sanctions were lifted.