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Oil Prices In Focus As Iran Accord Deadline Nears

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Crude oil prices crept up over $70 per barrel for the first time in the global market since late-2014, before a long-term slide in prices took many economies into tougher times, including a relatively short-term dip in U.S. equities during our near-decade-long bull run. This comes as most headline-grabbing companies have already reported results from calendar Q1 earnings season, and without a lot of economic data on the docket for the current week.

Why investors may pay closer attention to the price of oil this week — aside from already present spikes in gasoline prices at the pump — is because the May 12 deadline for whether the U.S. remains of the accord with Iran passed during the Obama administration that lifts economic sanctions in exchange for Iran keeping dormant its nuclear weapons development. President Trump has been a big opponent of this deal, both as a candidate and as president. Even with visits to the White House by people like France’s President Macron to assuage Trump to keep the U.S. within the agreement, odds are — like with the Paris Climate Accord — that we are likely to be out by week’s end.

It’s unclear what the immediate implications of this step would be, but that in itself is part of the problem: the stock market abhors uncertainty. In addition to higher oil prices — which may continue to spike as relations between the U.S. and Iran become more frayed — military tensions may increase as a result of this negated agreement, not just between the West and Middle East, but within the region itself. Hezbollah, formed initially in Iran, now wields influence in countries like Lebanon, which borders on Israel, the U.S.’s main ally in the region.

This is not the arena in which to debate U.S. foreign policy, but it is worth noting that a collapse in the Iran accord is likely to increase geopolitical concerns for investors in the U.S. stock market. Crude oil prices are already seeing the affect of this to a point, but ramifications have the potential of reaching much further. It would thus be reasonable to see market participants taking a guarded approach to investing ahead of the deadline this Saturday and beyond.

Ahead of Monday’s opening bell, Tyson Foods (TSN - Free Report)  reported a fiscal Q2 2018 miss on both top and bottom lines: $1.27 per share versus $1.32 was nevertheless up 25.7% year over year. Quarterly sales of $9.78 billion was short of the $9.94 billion Zacks consensus estimate. Earnings guidance for full-year 2018 was in-line with Q2 earnings results, +$6.55-6.70, between 23-25% year over year). For more on TSN’s earnings, click here.

Another food-producing major, SYSCO Corp. (SYY - Free Report)  reported mixed results for its fiscal Q3 2018 — earnings of 67 cents per share beat consensus by 3 cents (and rose 43% year over year), while revenues narrowly missed expectations when they came in at $14.35 billion in the quarter. Even still, SYY shares are up marginally in today’s pre-market. For more on SYY’s earnings, click here.


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