USA stocks end higher boosted by oil, bank shares

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The lion's share of Iran's oil exports, more than 1.5 million barrels per day (bpd), goes to Asian countries, and the reaction of China, Japan, India and South Korea to these new sanctions will be key to their impact.

"Since President Trump has not offered an alternative to improve the Iran deal - and instead insists on the need for a "better deal" - snap-back USA sanctions are likely to increase tensions on both sides of the Atlantic as the European Union navigates a hard balancing act between its JCPOA commitments and protecting its companies", Barclays said in a note.

One factor that could partially mitigate any shortfall from Iran is soaring USA oil output.

The $2 billion United States Oil Fund LP (USO), the largest ETF that tracks WTI, has gains of 17.1% this year; the $2.8 billion SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which holds stocks of energy producers, is up 9.6%; and the $18.5 billion Energy Select Sector SPDR Fund (XLE) is up 3.7%.

Crude prices swung wildly in recent days, as investors anticipated U.S. President Donald Trump's decision on Iran.

"Oil's always prone to rise on geopolitical tensions and the ongoing conflict between Iran and Israel is not something that can be resolved in the short-term", Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone in Seoul.

People are guessing that the sanctions would reduce oil exports from Iran between 200,000 up to 1 million.

"If a new Iran deal is not reached in the next six months or OPEC/Russia extend production cuts into 2019, global oil markets would likely tighten further", the report said. On Wednesday, as tensions over President Trump's withdrawal from the Iran nuclear deal increased, Brent saw its price rise 3%.

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That made Iran the third-biggest exporter of crude within OPEC, behind Saudi Arabia and Iraq.

Under the previous round of sanctions, India received waivers to purchase oil from Iran in rupees, rather than USA dollars, and now pays for Iranian oil using euros via European bank payment channels. But Europe is unlikely to do so. Richard Nephew, senior research scholar at Columbia University's Center on Global Energy Policy, added that China and India may continue to buy Iranian oil even in the face of US sanctions, negating some of their impact.

If oil prices continue higher past $70, many of these ETFs will nearly certainly follow suit. Riyadh lost no time in assuring the market on Tuesday that it would compensate for any fall in Iranian supply.

"The threat has helped oil prices rally, with Brent now at US$77pb, up 40% from the end of 2016".

Saudi Arabia said it would work with other producers to lessen the impact of any shortage in oil supplies.

Saudi foreign minister Adel Al-Jubeir said his country stood ready to "do whatever it takes to protect our people".

The International Atomic Energy Agency said Iran had been honouring its commitments under the deal.

Unlike 2012, the United States is entering these sanctions alone, and this means that it has less control over their efficacy.

The accord trades billions in sanctions relief in exchange for commitments from Iran to get rid of its enriched uranium stockpiles and decommission the vast majority of equipment which could be used to make more.

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