The high cost of oil reflects hopes of a strong recovery in demand at least as much as tensions in the Middle East. However, the price of a barrel of Brent probably still includes a premium of $10-15 for the possibility of more significant disruption to supplies. Further US sanctions implemented yesterday should increase the pressure on Tehran to make a deal with the West. However, Iran’s increasing ability to evade sanctions, elections for the Iranian Presidency in June, and today’s rejection of talks with the US by Iran’s supreme leader, may all delay any agreement until the second half of the year.
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