These days oil and gas are being used like pawns in the game of brinkmanship between the US and Iran-a game that is hurting business. In this game, even the pawns must hold a grudge.
Last week, oil prices slipped after Iran’s President Mahmoud Ahmadinejad announced that his country would free 15 British naval personnel it had captured in the Persian Gulf more than a week before, pardoning and releasing them as a pre-Easter gift to Britain.
The “pardon” came as commodities trade was winding down for the long Easter weekend, with exchanges in London and New York preparing to close for Good Friday.
In London, the reaction was swift: By midafternoon on Apr. 4, West Texas Intermediate for May delivery on the New York Mercantile Exchange was down 43¢ at $64.21/bbl, while May Intercontinental Exchange Brent crude was 31¢ lower at $67.52/bbl.
Wall Street drops
As one analyst noted, the capture of British sailors by Iran had created nervousness in oil markets-a point underlined by the $5 surge in oil prices on Mar. 27 after rumors that a conflict had started between Iran and the US.
When the rumors were shown to be false, prices eased. But they still moved higher over the rest of the week as people everywhere-and traders among them-kept their eyes on the unfolding drama.
On Wall Street, the S&P 500 index dropped to 1,417.05 from 1,426.2.
The Iranians are an old trading nation, and they know perfectly well how markets react to any threat to supply-especially any threat to the supply of a commodity as important as oil.
The Iranians’ seizure of the British sailors and marines was carefully planned. It was done with enough time to rattle stock markets but also timed to fit as neatly as possible into the Christian holiday calendar.
Petrobras threatened
The Iranians lost no face by promising to release the captives before Easter. Indeed, they may even have looked more humane-as they hoped to look-by the gesture, an especially strong one coming from a Muslim nation on the approach of a key Christian holiday.
So the Iranians were able to score a hit. They showed the world how a bit of saber-rattling can affect markets up and down the supply chain, and they got away with the gesture unscathed. Behind all this, of course, is the Iranians’ desire to have their way regarding the development of nuclear power.
But the power struggle also works the other way. Clifford Sobel, the US ambassador in Brasília, reportedly told Sérgio Gabrielli, president of Petroleo Brasileiro SA (Petrobras), that the US was concerned over the company’s increasing activities in Iran.
According to the newspaper Valor Econômico, Sobel said such activities might “create complications” for Petrobras’s operations in the Gulf of Mexico.
Two wrongs never make a right-just ask the pawns.
