By George Prior
Should the US tighten sanctions on Iran’s crude oil exports in response to the country backing Hamas, it will impact investment portfolios around the world, says the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The analysis from deVere Group’s Nigel Green comes ahead of a widely expected ground offensive by Israel into Gaza, which could shift the mood music for the West’s response to Iran.
He says: “These sanctions, while driven by geopolitical concerns, are likely to significantly impact portfolios for individual and institutional investors globally. As ever, with increased volatility, there will be fresh opportunities and fresh risks.
“Portfolios that include energy sector assets can be directly affected by the sanctions on Iran’s crude oil. Iran is a major oil producer, and restrictions on its exports can result in a reduction in global oil supply, which, in turn, could boost the profitability of energy companies.
“While some energy stocks may benefit from rising oil prices, others may face challenges due to increased production costs.
Free Reports:
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Download Our Metatrader 4 Indicators – Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
“Dividend stocks in the energy sector could see price increases, which might be positive for income-focused investors. However, dividend sustainability may be threatened if higher oil prices lead to increased expenses for energy companies.”
The rise in oil prices due to sanctions can lead to broader economic consequences, particularly in the form of inflation.
“Central banks, which have been battling to bring down multi-decade high inflation peaks over the last two years, may respond to rising inflation by considering increasing interest rates again.
“Higher interest rates make borrowing more expensive for businesses, impacting their expansion plans and investments. This, in turn, affects stock prices and overall portfolio performance.”
Nigel Green continues: “Companies across various industries would also face increased production costs due to higher oil prices. These added expenses can pressure businesses to pass the costs onto consumers, potentially impacting their profitability and share prices.
“Developing economies are particularly vulnerable to oil price spikes. Many of these countries rely heavily on imported oil, and surging prices can strain their trade balances and currencies. As such, investors with heavy exposure to these markets need to be extra cautious as risks are heightened.
“In addition, changes in oil prices influence currency exchange rates. Investors in currency markets may need to navigate these shifts, which can impact the value of their investments.”
Sanctions on Iranian oil can introduce geopolitical risks to your investment portfolio. To mitigate these risks, you need to ensure proper diversification of your portfolio across different asset classes, industries, and geographical regions to spread risk and reduce the impact of sanctions on specific sectors.
Also, you should develop a risk management strategy that includes setting stop-loss orders, adjusting your asset allocation, and staying informed about geopolitical events that can impact your investments.
Working with financial advisors who can provide insights and recommendations tailored to your specific investment goals and risk tolerance is likely to prove highly beneficial.
“The US tightening sanctions on Iranian oil could have a negative impact on individual and institutional investment portfolios by disrupting the energy sector, contributing to inflationary pressures, and intensifying geopolitical risks. You need to be aware of the risks – but also the opportunities,” concludes the deVere Group CEO.
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices across the world, over 80,000 clients and $12bn under advisement.
- Goldman Sachs has updated its economic projections for 2025. EU countries are looking for alternative sources of natural gas Dec 23, 2024
- COT Bonds Charts: Speculator Bets led by SOFR 3-Months & 10-Year Bonds Dec 21, 2024
- COT Metals Charts: Speculator Bets led lower by Gold, Copper & Palladium Dec 21, 2024
- COT Soft Commodities Charts: Speculator Bets led by Live Cattle, Lean Hogs & Coffee Dec 21, 2024
- COT Stock Market Charts: Speculator Bets led by S&P500 & Russell-2000 Dec 21, 2024
- Riksbank and Banxico cut interest rates by 0.25%. BoE, Norges Bank, and PBoC left rates unchanged Dec 20, 2024
- Brent Oil Under Pressure Again: USD and China in Focus Dec 20, 2024
- Market round-up: BoE & BoJ hold, Fed delivers ‘hawkish’ cut Dec 19, 2024
- NZD/USD at a New Low: The Problem is the US Dollar and Local GDP Dec 19, 2024
- The Dow Jones has fallen for 9 consecutive trading sessions. Inflationary pressures are easing in Canada. Dec 18, 2024
